ATLANTIC CITY — Want to buy a shuttered casino in the resort, reopen it and return it to its past glory? Well, it’s not as easy as some developers think.
Deed restrictions on properties up and down the Boardwalk have muddled redevelopment opportunities in the city.
Some require gaming at closed properties. Others restrict gaming. At a time when the city is trying to reinvent itself, the myriad deed restrictions have made it both expensive and difficult to redevelop properties, experts said.
The closed Atlantic Club, Trump Taj Mahal Casino Resort and Trump Plaza Hotel and Casino all have deed restrictions preventing them from reopening as casinos. Trump Taj Mahal, which closed Oct. 10, was the latest to have a prohibition added. Trump Taj Mahal Associates LLC, the owners of the property, placed a restriction on it prohibiting gaming if it is sold, according to paperwork filed with the Atlantic County Clerk’s Office on Dec. 19.
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The restrictions and paying to get them lifted prevent some developers from coming into the city, said Richard Perniciaro, director of the Center for Regional and Business Research at Atlantic Cape Community College.
“A deed restriction protects the owner’s other investments in town,” Perniciaro said. “If the market was booming and land remained for new properties, a deed restriction would be meaningless. Investors could simply build their own new property or pay more for the property with casino rights.”
Deed restrictions impose rules that a property owner may want to place on how future owners may use the land or buildings.
In 2015, a deed restriction halted Stockton University’s plans to convert Showboat into a city campus. The restriction called for the continued operation of Showboat as a “first-class casino hotel.” The issue forced Stockton to sell the property to Philadelphia-based developer Bart Blatstein. The restriction has since been lifted.
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“In the current situation, restrictions have devalued some areas of the city while at least protecting values in other areas,” Perniciaro said.
Perniciaro said Showboat’s restriction was added by owner Caesars Entertainment to protect its two other Boardwalk properties, Bally’s and Caesars. Likewise, billionaire owner Carl Icahn placed a restriction on the Taj to protect his other property, Tropicana Atlantic City.
Perniciaro said the restrictions are sound business decisions aimed at protecting property owners.
“If the bricks-and-mortar pie is still shrinking or, at best, leveling off, the best use of the restricted properties for the current owners is as hotel rooms to expand capacity in the summer months,” Perniciaro said. Those customers in the new hotels would, logically, be steered toward the casinos in their parent company, he said.
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But proponents of deed restrictions have said it’s not about restricting competition but rather property-tax payments. A deed-restricted vacant casino is exempt from making annual payments in lieu of taxes. The current PILOT applies to casinos that are “not subject to recorded covenants prohibiting casino gaming.”
“I think that deed restrictions are not good for the city,” said Assemblyman Vince Mazzeo, D-Atlantic. “Right now, it seems to be a huge problem. We want to put people back to work, and this type of thing is preventing it.”
Assemblyman Chris Brown, R-Atlantic, said deed restrictions usurp zoning regulations and restrict competition in the gaming market. In 2014, Mazzeo and Brown proposed a bill that called for the state Division of Gaming Enforcement to prohibit deed restrictions limiting the use of casino hotel properties. The bill never received a hearing in committee.
“They should not be able to control the market,” Brown said.
However, Perniciaro said restricting deed restrictions could also drive property values down.
“The result of outlawing restrictions — aside from the legal questions about property rights — would, I believe, dilute what remains of the casino market and in the end cause a lowering of value of all properties, having negative complications for how A.C. competes with other gaming locations,” Perniciaro said.