ATLANTIC CITY — “Bank Owned” signs litter the lawns of foreclosed homes across America. Now, the banks are grabbing ownership of Atlantic City’s oldest casino.
Resorts Atlantic City is being taken over by a group of lenders headed by Wells Fargo Bank after it defaulted on its mortgage and faced possible foreclosure.
“It was a struggle. It was not easy, but we got it done,” Resorts Chief Executive Officer Nicholas L. Ribis said in an interview Wednesday with The Press of Atlantic City.
The lenders will officially take control when the deal closes Thursday, Ribis said. Final details of the transaction were completed Wednesday.
“We have been told that the closing process has begun and that all necessary documents have been finalized,” New Jersey Casino Control Commission spokesman Daniel Heneghan said. “All that remains is simply the ministerial task of exchanging signed copies and filing whatever is necessary.”
The commission gave its approval in November for lenders to take charge after Resorts stopped paying its $360 million mortgage and was threatened with foreclosure. Never before in the city’s 31-year history of legalized gambling have lenders become casino owners in this way.
“I think everyone has been able to resolve the outstanding issues amicably. We’re a little tired, but pleased,” said Paul M. O’Gara, a New Jersey attorney representing the lenders.
This new era of bank ownership in Atlantic City’s turbulent casino industry stems from the weak economy and the reluctance of gamblers to spend big bucks at the slot machines and gaming tables.
Resorts’ new owner will be a newly formed company called RAC Atlantic City Holdings LLC. RAC is controlled by Wells Fargo Bank, acting on behalf of Credit Suisse First Boston Mortgage Securities Inc. Credit Suisse is the parent company of Column Financial Inc., the holder of Resorts’ mortgage. The mortgage is being wiped out as part of the lender takeover.
The lenders replace Colony Capital LLC, a private real estate investment firm that bought Resorts in 2001 for the fire-sale price of $140 million. Ribis, Colony’s former partner, will now manage the casino for the lenders and has emerged as a possible buyer. The lenders have made it clear they intend to search for a new buyer once the property’s shaky finances are stabilized.
“I love Resorts. It’s always been a property that has had my heart and soul,” Ribis said, strongly hinting at his interest as a buyer.
For now, the lenders will take charge of a casino that has had a tumultuous history since the 1980s. Colony Capital acquired Resorts from Sun International Hotels Ltd., which had paid $301 million to buy the casino from entertainer Merv Griffin in 1996 and took a huge loss in selling it. Griffin’s ownership in the 1980s and ’90s was marred by two bankruptcies.
Ribis said the transition to new owners will be seamless for customers and employees. Upgrades are planned to make the property more appealing, he added.
“The employees will continue to have the same management as before under my management company,” Ribis said. “Customers will see no change. Resorts’ customers are the most loyal in Atlantic City.”
Resorts opened on May 26, 1978, to usher in Atlantic City’s casino age. But over the years, it has faced enormous challenges stemming from the age of the property and its small size compared to other casinos. Created from the remains of a 1920s hotel called Haddon Hall, the casino has been unable to keep pace with its bigger, younger and glitzier Boardwalk rivals.
Resorts is the city’s second lowest-grossing casino. It has suffered a nearly 17 percent drop in gaming revenue this year and has posted a $23.9 million loss in net income through the first three quarters.
Lenders plan to immediately invest $8 million to help Resorts through its financial crisis. The cash infusion will also allow Resorts to fulfill the Casino Control Commission's requirement to maintain a $15 million reserve fund — essentially a safety net — to help pay its bills through Atlantic City’s traditionally lean winter tourist season.
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