Pinnacle Entertainment Inc., after three years of trying, has finally reached agreement to sell prime, casino-zoned land along the Boardwalk for a steeply discounted price.
In a newly filed securities document, Pinnacle disclosed that it has entered into a “definitive agreement” to sell the land for $30.6 million to an unidentified buyer. Pinnacle noted the deal is expected to close by the end of March, but also said that it depends on a “financing contingency.”
Pinnacle did not elaborate on the nature of the financing contingency in its filing with the federal Securities and Exchange Commission. Pinnacle spokeswoman Kerry Andersen declined further comment.
“At this point, we have nothing to add outside of what is contained in our public disclosures,” Andersen said.
The slow sale of the nearly 20-acre oceanfront property began in 2010, after the Las Vegas-based Pinnacle abandoned its plans to build a $1.5 billion to $2 billion megaresort on the land.
Earlier plans for unloading the property fell through, dragging out Pinnacle’s exit from Atlantic City. At one point, the company announced that it planned to complete the sale by the end of 2012.
At $30.6 million, the sale price represents a fraction of the $270 million that Pinnacle paid to buy the site in 2006 at the height of the Atlantic City real estate market. Since then, land values and casino revenues have plummeted. For instance, the California-based Meruelo Group announced last month it has agreed to buy Trump Plaza Hotel and Casino for just $20 million, a far cry from the casino’s $210 million construction cost in 1984.
Pinnacle filed a tax appeal challenging the assessed value of its property. The company settled the case with Atlantic City in December 2011 and was awarded a refund of $8.2 million. Previously, the land was assessed at $224 million, but the figure was reduced to $65 million.
Pinnacle’s land is where the old Sands Casino Hotel once stood. Pinnacle imploded the Sands in 2007 to make room for development of its proposed Las Vegas-style casino resort, but the project died amid the recession and global credit crisis.
Other development proposals never materialized. Pinnacle briefly played with the idea of developing a small, boutique-style casino hotel before backing away from that project in 2011.
Pinnacle’s failed projects have come to symbolize the troubled Atlantic City casino industry, which is in a six-year revenue slump caused by the sluggish economy and gambling competition in surrounding states.
Most of the site consists of the old Sands property, a supersized block bordered by Indiana Avenue, Pacific Avenue, Dr. Martin Luther King Jr. Boulevard and the Boardwalk. There are other smaller, outlying parcels, mainly along the beach block of Kentucky Avenue.
Last year, the property was transformed into a public art display featuring sculpture work, a faux pirate ship and inspirational messages amid a park-like setting. The Atlantic City Alliance, a casino-funded marketing coalition that helped finance the art work, has emphasized that the display is only temporary and that it will be removed when the land is ready for redevelopment.
Joshua Levin, an Atlantic City commercial real estate broker, said the Pinnacle site offers developers an expanse of land in the central part of the Boardwalk casino zone.
“The one thing you have is buildable property with Boardwalk frontage, so that makes it a desirable site,” Levin said. “It usually takes years to assemble a property of that size. That’s a great location in the middle of town.”
Although the land is zoned for casino development, Levin suggested that a mix of nongambling attractions, such as a hotel, entertainment and retail, might be a better option. He said nongambling attractions have been performing better than the casino floors during the current casino slump.
“We need more diversified attractions in Atlantic City — different things than we currently have — to maintain and attract the flow of people,” Levin said.
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