A state senator is calling on New Jersey gambling regulators to stop the largest casino operator in the U.S. from ensuring that the former Atlantic Club Casino Hotel will never again function as a casino.
State Sen. Jim Whelan, D-Atlantic, wrote in a letter Thursday to the New Jersey Division of Gaming Enforcement and Casino Control Commission that Caesars Entertainment Corp., which now owns the former casino, is seeking a buyer but is requiring a deed restriction prohibiting the oceanfront property from being used as a casino.
He said the move on the part of New Jersey’s largest casino operator supports his stance that the gambling giant has too much control of the Atlantic City market. He believes the company’s actions could violate New Jersey law prohibiting one company from controlling too much of the casino market.
“Obviously they want a monopoly and they want to keep other competitors out of the market,” Whelan said in an interview. “That might be good for Caesars, but it’s not good for Atlantic City. We shouldn’t allow Caesars to dictate the future of Atlantic City. It’s a bad public policy, and it goes against state law.”
Assemblyman Chris Brown, R-Atlantic, backed Whelan’s position, calling Caesars’ strategy “shortsighted and counterproductive.”
“Our mutual goal from Atlantic City should be to maintain an inviting and open market for more investment, no matter what form it takes,” Brown said.
Katie Dougherty, a spokeswoman for Caesars Entertainment in Atlantic City, declined to comment on whether the company intended to deed-restrict the property and what its plans are for Atlantic Club.
Atlantic Club shut down Jan. 13 after filing for Chapter 11 bankruptcy protection. Caesars Entertainment and Tropicana Entertainment purchased the casino for a record low $23.4 million, with Tropicana taking the gambling equipment and Caesars taking the building in a move analysts said could lead to further market downsizing. Caesars has said it has no plans to operate the property but has not publicly announced any other intentions.
Whelan also attacked Caesars earlier this month saying the company could be asserting too much control in Atlantic City. At that time, he said Caesars, which accounted for about 38 percent of the the state’s $2.9 billion in casino revenue last year, was among the parties interested in purchasing Revel Casino-Hotel. Any sale to Caesars, Whelan argued, would violate New Jersey law forbidding “undue economic concentration” by one casino operator.
In the case of a sale, regulators would have an opportunity to address the economic concentration issue as a condition of new casino licensure, but involvement by regulators in the Atlantic Club situation is not automatic. Whelan said that because Caesars is licensed to operate four Atlantic City casinos — Bally’s, Caesars, Showboat and Harrah’s Resort — the company is required to abide by licensing conditions, including the undue economic concentration clause, which regulators enforce.
“Instead of maximizing the sale price, as most sellers would, they are more interested in limiting future potential competition,” Whelan wrote Thursday to DGE Director David Rebuck and CCC Chairman Matthew Levinson.
A former Atlantic City mayor and current head of the State Government, Wagering, Tourism and Historic Preservation Committee, Whelan said Caesars similarly imposed a deed restriction when it sold the Claridge hotel tower from Bally’s Atlantic City in October. The Claridge was sold to TJM Properties Inc., which plans to operate the 500-room tower as a standalone hotel.
Whelan said he only recently became aware of the conditions imposed on the Claridge and said the pattern is concerning and restrictive for the Atlantic City market.
Lisa Spengler, a spokeswoman for the DGE, said the division would review Whelan’s letter but any other comment would be inappropriate. Levinson acknowledged Whelan’s concerns but declined to comment at length.
“I appreciate and respect Sen. Whelan's concerns, but it would not be appropriate to comment at this time since the issue of economic concentration may come before the commission,” Levinson said.
Whelan declined to name who might be interested in purchasing the property but said he spoke with real estate agents representing multiple potential buyers.
“While it may well be that the current market would make it unlikely that the property would reopen as a casino, there is no telling what the market conditions will be in 15, 10 or even 5 years from now,” Whelan wrote in the letter. “Shouldn't we allow the market to dictate if and when this property could become a casino again, not have Caesars restrict competition?”
Whelan also cited Caesars’ financial position among his concerns. The Las Vegas Review-Journal reported this week that the company has hired an investment bank to help restructure some of its $23 billion in debt, which analysts have said is unsustainable.
“I don’t think you want any company, but particularly a company with this much debt, trying to monopolize Atlantic City,” Whelan said.
State law requires that a casino license not be issued if it results in “undue economic concentration” of casino operations. The term, however, is not defined by a clear formula. Instead, nearly a dozen criteria are expected to be considered to make a determination.
Among the factors considered are market share in rooms, slot machines, table games and net revenue. Current market conditions and the potential impact of the licensure on the projected future growth of the city’s gambling industry must also be considered.
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