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Edward Lea / Staff Photographer  

Cape-Atlantic League Individual Swimming Championships at Atlantic City High School Thursday Jan 31, 2019.Press of Atlantic City / Edward Lea Staff Photographer

Ocean Resort's hedge fund owner is new player in long line of Atlantic City investors

ATLANTIC CITY — With the announcement Monday that Luxor Capital Group, a New York-based private investment firm, had assumed majority control of Ocean Resort Casino, many are wondering what the future holds for the struggling property.

But the company’s intentions for Ocean Resort remain unclear.

“It’s hard to say,” said David G. Schwartz, director of the Center for Gaming Research at the University of Nevada-Las Vegas. “It certainly doesn’t signal that (Luxor) had a lot of confidence in what was going on if they took control, but you never know.”

A public relations spokesperson for Luxor declined to comment on the company’s plans Monday when reached for comment. Luxor and JPMorgan Chase Bank were primary lenders to the property’s former owner, Bruce Deifik, who purchased the former Revel Casino Hotel for $229 million in January 2018.

The term hedge fund often elicits negative connotations of vulture capitalists and corporate raiders stripping an acquired asset of every semi-profitable element before selling off the remains.

The reality of hedge funds, and their interest in casino gaming, is more complex than that.

Hedge funds are typically lenders that believe they are going to “outsmart the market by understanding better than the average investor the risk-reward relationship,” said Robert Heller, co-founder and CEO of Spectrum Gaming Capital.

“Every investor wants to buy low and sell high, but hedge funds are much more opportunistic. They tend to be shorter-term focused,” said Heller.

The original interest by high-yield investors (the precursor to hedge funds) in casino gaming was a result of perception of the industry as a “sin business” that was shunned by traditional investors, he said.

“Gaming developed a very good name in the high-yield market because the yields associated with gaming investments in the past exceeded the risk,” said Heller.

The various bankruptcies in the casino gaming industry around 2008, particularly in the Atlantic City market, brought about a renewed interest by hedge-fund investors and private-equity firms.

For the Atlantic City casino industry, the involvement of hedge funds is not new and has yielded mixed results. In just the last decade, companies such as Avenue Capital purchased Trump Entertainment Resorts and Icahn Enterprises took ownership of Tropicana Entertainment.

Trump Entertainment is now a subsidiary of Icahn Enterprises, and Tropicana Entertainment was sold in 2018 to Eldorado Resorts as part of a $1.85 billion deal.

Even Revel, during its two-year stint between 2014 and 2016, saw a group called Chatham Asset Management assume a nearly 30 percent stake in the failed casino property.

Luxor has not made public any formal plans for Ocean Resort other than a $70 million investment, which will go toward a “world-class buffet, additional suite and room product, incremental investments on the casino floor and other exciting projects,” according to a news release from the casino and the hedge fund.

On Feb. 6, the Casino Control Commission will consider approving a joint petition by Luxor and Deifik for a divestiture trust agreement, which will begin the process of the hedge fund being qualified to hold a casino license. A copy of the joint petition states that $50 million of Luxor’s investment will go to pay down a principal balance of the JPMorgan loan made to Deifik to buy the property.

Even with a significant capital investment, there are fundamental flaws with the property, such as its unorthodox layout and location at the end of the Boardwalk, that even Luxor may not be able to rectify.

Heller said he believed the new team “needed to do more” before reopening the property June 27.

“They needed to make that property more special to make it work,” he said.

Wildwood Crest joins Cape May County dispatch

LOWER TOWNSHIP — Six months after launching, a handful of dispatchers work in the new Cape May County dispatch center, but around them are empty work spaces waiting to be filled in.

This spring, it’s likely three of those empty stations will be filled as the center takes over dispatch services for Wildwood Crest.

“Everybody is taking a wait-and-see approach,” David C. Thompson, Wildwood Crest’s commissioner of public safety, said Thursday. “The whole county has been watching to see if they got the bugs worked out. Pretty much, a lot of the community feels that we’re in good shape.”

Despite the empty stations, county officials are still optimistic in their vision to create a centralized dispatching system that covers all 16 municipalities. It’s a move that will save municipalities time and money, officials say, while enhancing public safety and keeping jobs for dispatchers, who bring local knowledge and skills to the table.

On Jan. 15, Wildwood Crest became the fourth municipality in the county to announce it is going to transfer its dispatch services to the county. The borough joins Avalon and Stone Harbor, whose fire and EMS personnel are dispatched out of the center, while Lower Township joined with police, fire and EMS.

Thompson said joining the county dispatch center will save between $90,000 and $100,000 per year in salaries, benefits, equipment repairs and updating, but that’s just to start.

Those savings are estimated to increase to more than $150,000 per year, starting in the third year, Thompson said.

The center charges a quarterly fee based on the number of calls a municipality receives, said Marty Pagliughi, the county’s emergency management coordinator.

“But this is not all about saving money,” Thompson said. “Their dispatch center is state of the art. They will provide services that Wildwood Crest cannot provide.”

County officials launched the dispatch center — which also dispatches for the Sheriff’s Office and the Prosecutor’s Office — in June after years of planning and putting $6 million into renovating the Lower Township Public Safety Building at the county airport. The center boasts the latest dispatching technology but also has systems in place to keep pace with municipalities with older systems.

Pagliughi said the center has two radio systems, a 700 MHz Public Safety Spectrum, which many municipalities in the state are upgrading to, as well as a VHF, or very high frequency system, that is more common.

“We can even patch the frequencies together so they can talk to each other,” Pagliughi said.

In addition, the center uses Next Generation 911, a service that allows residents on cellphones to text in their emergencies, and Emergency CallWorks, which can pinpoint a caller’s location to within 150 feet, Pagliughi said.

“The biggest problem with cellphones, for years, was that if you call 911 from a cellphone, it would go to the nearest cell tower, and sometimes that could be a couple miles away,” he said. “We’ve had them in Lower Township where it would go to Delaware.”

Thompson said Wildwood Crest wouldn’t have the upgraded technology without the regional center.

“In an emergency situation, that’ll be much more beneficial to our town,” he said.

It’ll take a few months for the county to absorb Wildwood Crest’s dispatch center as officials transfer data, complete testing and start training dispatchers on their system.

Wildwood Crest Fire Chief Ron Harwood said he thinks it will be a seamless transition and a “new adventure.”

“We’re excited about going,” he said. “With the costs in the future, this is how everyone wins.”

The county is interviewing dispatchers from the borough for positions at the regional center, Pagliughi said.

Cape May County launches centralized dispatch center

LOWER TOWNSHIP — After years of planning and $6 million spent on renovations and equipment upgrades, Cape May County officially launched its centralized dispatch center at the Lower Township Public Safety Building at the county airport.

Keeping dispatchers was a “big factor” in Wildwood Crest’s decision to join the county, Thompson said.

Bringing on local dispatchers is a selling point for Pagliughi, too, who said their local knowledge is invaluable.

“It’s smart for us to hire local dispatchers from a municipality we take,” Pagliughi said. “We can cross-train with the existing dispatchers we have. It just makes sense.”

Craig Matthews / Staff Photographer/  

Mazzeo A bill sponsored by Assemblyman Vince Mazzeo would set up a commission to study countywide property-tax assessment and make recommendations on if and how it should be used in New Jersey. It passed out of the Assembly State and Local Government Committee on Thursday.