Mid-Atlantic Casino Evaluation
Tropicana Entertainment Inc., formed to acquire certain assets of Tropicana Entertainment Holdings, LLC ("TEH"), and certain of its subsidiaries pursuant to their plan of reorganization under Chapter 11, filed a 10-Q with the SEC on Monday in which it discussed the growth of gaming in several Mid-Atlantic markets.
The following information is culled from that 10-Q:
The Tropicana Resort and Casino-Atlantic City, or Tropicana AC, is located on a 14-acre site with approximately 660 feet of ocean frontage along the Boardwalk in Atlantic City, New Jersey. The property features 2,129 hotel rooms and suites, approximately 3,159 slot machines, approximately 135 table games, 35 poker tables and 13 restaurants and bars. The property also features The Quarter, a Havana-themed, more than 200,000 square foot, Las Vegas-style indoor entertainment and retail center, including 15 restaurants, 25 shops and an IMAX theatre. Other amenities include a 2,000-seat theatrical showroom, a full service spa and salon, a health club and indoor pool, a beach and pool bar and approximately 120,000 square feet of convention space.
Tropicana AC competes with casino and gaming facilities located in New Jersey, Pennsylvania, New York, Maryland and Delaware. The following is a brief summary of competition in these five states.
New York.
Pursuant to legislation enacted in 2001, the Division of the Lottery of the State of New York is authorized to permit the installation of VLTs at various horse racing facilities in New York. During 2004, VLT operations commenced at four upstate and western New York racetracks and at a racetrack in Sullivan County, which operates 1,500 VLTs and is considerably closer (approximately 95 miles) to Manhattan. The VLT facility at Yonkers Raceway ("Yonkers") opened in late 2006 and now operates 5,500 VLTs. In addition, several casino operators are currently bidding for a license to operate a proposed 4,500 VLT facility at Aqueduct Racetrack ("Aqueduct"); however, the State of New York has not selected the winning bidder. Once construction begins on the facility, it is expected to take approximately 12 to 14 months to complete. At this time, we cannot ascertain when and if construction will begin.
Additionally, at various times there have been discussions about allowing VLTs at the Belmont racetrack. These Yonkers, Aqueduct and Belmont locations are less than fifteen miles from Manhattan.
The 2001 legislation also authorized the Governor of New York to negotiate compacts authorizing the operation of up to six Native American casino facilities including slot machine gaming. A compact negotiated in 2002 authorized three such facilities located in the western part of New York and outside of Adamar's primary market area. The remaining three Native American casinos, if developed, are required by law to be located in either Sullivan County or Ulster County, adjoining counties approximately 100 miles northwest of Manhattan. Competition from the VLT facilities at Aqueduct Racetrack and Yonkers Raceway and from potential Native American casinos as may be authorized and operated in Sullivan or Ulster County could adversely impact Atlantic City casinos, including Tropicana AC.
Pennsylvania.
In July 2004, the Pennsylvania legislature enacted the Race Horse Development and Gaming Act which authorizes the Pennsylvania Gaming Control Board to permit a total of up to 61,000 slot machines in up to fourteen different licensed locations in Pennsylvania, seven at racetracks (each with up to 5,000 slot machines), five at slot parlors (two in Philadelphia, one in Pittsburgh and two elsewhere, each with up to 5,000 slot machines)and two at established resorts (each with up to 500 slot machines). Three of the racetrack sites, Pocono Downs, Philadelphia Park and Chester Downs and three slot parlors, two in Philadelphia and one in Bethlehem, are located in the market area of Tropicana AC. Slot machine operations commenced in late 2006 at the racetracks and, as of late 2008, approximately 9,000 slot machines were operating at these locations. Sands Casino Resort Bethlehem recently opened in May 2009 with approximately 3,000 slot machines with plans to add an additional 2,000 slot machines in November 2009. In October 2009, Sugar House Casino commenced construction of its $310 million casino in Philadelphia to include 1,700 slot machines which is anticipated to be completed in August 2010. The other Philadelphia slot parlor is to be built by Foxwoods Casino and continues to experience delays in receiving the necessary approvals to commence construction. When fully operational, the Philadelphia area locations could operate up to 15,000 slot machines. Competition from the Pennsylvania area slot machine facilities that are currently operational has adversely impacted Atlantic City casinos, including Tropicana AC.
In addition, Pennsylvania approved the legalization of live table games in January, 2010. We believe that the legalization of live table games in Pennsylvania and the potential opening of these other slot parlors could further adversely impact Atlantic City casinos, including Tropicana AC.
Maryland.
In November 2008, Maryland voters passed a referendum to allow 15,000 slot machines at five locations across that state. The State of Maryland set a February 2009 deadline for bids to operate the five locations and received only four qualified bids to operate slot machines and no one bid for the fifth location. In the initial bids received, potential operators bid for 6,550 of the total potential slot machines available. In September 2009, the first location to win approval was the Ocean Downs Racetrack, which is expected to include 600 slot machines that are anticipated to be in operation by Memorial Day 2010. In October 2009, a second location was approved in Cecil County which will be developed and managed by Penn National Gaming ("Penn").
Penn has announced plans to build a $97.5 million facility including 1,500 slot machines and is expected to be open by late 2010. Proposals for the two remaining bids, including the two largest casinos envisioned by the state in Anne Arundel County and Baltimore, continue to face obstacles that could delay operations past planned openings in 2011. We believe these facilities in Maryland could adversely impact Atlantic City casinos, including Tropicana AC.
Delaware.
Tropicana AC competes with Delaware primarily for gaming customers from the Southern New Jersey, Southern Pennsylvania and Delaware regions. In May 2009, Delaware approved sports betting which is currently limited to parlay wagering on National Football League games, where bettors must win bets on multiple games. In addition, live table game legislation has been introduced from time to time and is expected to be introduced again when the Delaware General Assembly reconvenes in January 2010. While Atlantic City's casinos currently offer table games, they are currently not permitted to offer sports betting. We believe the introduction of the limited sports betting in Delaware and the legalization of live table games could adversely impact Atlantic City casinos, including Tropicana AC.
Atlantic City Market.
The Atlantic City market primarily serves the New York-Philadelphia-Baltimore-Washington, D.C. corridor with nearly 30 million adults living within a three-hour driving radius. The Atlantic City market is currently the second largest gaming market in the United States, after Las Vegas.
Competition in Atlantic City is intense and continues to increase. Currently, the 11 casino hotels located in Atlantic City, including Tropicana AC, compete with each other on the basis of customer service, quality and extent of amenities and promotional offers. For this reason, Adamar and its competitors have historically incurred substantial capital expenditures to compete effectively.
During 2008, certain of Adamar's competitors in Atlantic City completed significant room expansion projects and added other new amenities to their facilities. Trump Entertainment Resorts recently completed the construction of a new, 782-room hotel tower at the Taj Mahal, the Chairman Tower. Revel Entertainment Group ("Revel") continues development on a 20-acre, oceanfront site next to the Showboat Casino Hotel. Revel has announced that it plans to construct an approximate $2 billion mega resort which was originally expected to open in late 2010. While Revel has obtained interim financing allowing it to commence certain work at the site, it has not yet received financing for its complete project. It recently announced that it would slow construction on the project until it can secure long-term financing. At this time we cannot ascertain when and if Revel's project will be completed.
We believe that there are several other sites on the Boardwalk, in the marina district and possibly at Bader Field, a former airport located in Atlantic City, if that area is zoned for gaming, where casino hotels could be built in the future. Additionally, various applications for casino licenses have been filed and announcements with respect thereto have been made from time to time in these areas.
In April 2004, the Atlantic City casinos executed an agreement with the New Jersey Sports and Exposition Authority ("NJSEA") which owns and operates two of the four New Jersey horse race tracks, including the Meadowlands race track. The agreement provides that annual payments made by the casinos to the NJSEA in each of 2004 through 2008 in order to subsidize horse racing would establish a moratorium on the conduct of casino gaming, including video lottery terminals ("VLTs") at any New Jersey race track until January 2009.
In August 2008, the Atlantic City casinos executed a new agreement with the NJSEA (the "2008 NJSEA Subsidy Agreement"). The 2008 NJSEA Subsidy Agreement provides that substantial annual payments made by the casinos to the NJSEA in 2008 through 2011 in order to subsidize horse racing would establish a moratorium on the conduct of casino gaming, including VLTs at any New Jersey race track until December 31, 2011.
We cannot ascertain at this time the effects that any new projects could have on the Atlantic City gaming market. However, future developments and expansions could have a material adverse effect on our business and operations.
Directors and Officers
Scott C. Butera. Mr. Butera has served as our sole director and as President and Chief Executive Officer since our formation, and has also served as President of TEH since March 19, 2008, and as Chief Executive Officer and member of the Board of Managers of TEH since June 6, 2008. He is a member of the Regulatory Gaming Compliance Committee of the Board of Managers of TEH. Prior thereto, Mr. Butera held a number of executive positions in the gaming industry, including as Chief Operating Officer of the Cosmopolitan Resort Casino in Las Vegas, Nevada, from January 2007 through March 2008, President of Metroflag Management LLC, a casino resort development company located in Las Vegas, from November 2005 through January 2007, and prior to November 2005, he was President, Chief Operating Officer, and Executive Vice President of Trump Hotels & Casino Resorts, Inc., during which time he was the principal architect of the company's financial and operational restructuring. Mr. Butera also served previously as an Executive Director for UBS Investment Bank, which culminated a fifteen-year career as an investment banker focused on the gaming, lodging, and real estate industries. Mr. Butera holds a Masters in Business Administration from New York University's Leonard N. Stern School of Business and is a graduate of Trinity College in Hartford, Connecticut.
Marc H. Rubinstein. Mr. Rubinstein has served as our Senior Vice President, Law and Administration, and Secretary since our formation and has served in the same capacity at TEH since July 28, 2008. Prior to accepting his position with TEH, Mr. Rubinstein held similar positions with other casino gaming companies, including as general counsel and corporate secretary for Cosmopolitan Resort & Casino, Las Vegas, from 2006 through 2008, Wynn Resorts, Limited, from 2000 to 2006, and the Nevada properties of Caesars World, Inc., from 1992 through 2000, including Caesars Palace, Caesars Tahoe, and The Desert Inn. Mr.Rubinstein began his career with the Las Vegas law firm of Lionel Sawyer & Collins after graduating magna cum laude with a B.S. from Duke University and receiving a J.D. from New York University School of Law.
Lance J. Millage. Mr. Millage has served as Senior Vice President, Finance and Treasurer since November 16, 2009. Prior to accepting his position with TEH, Mr. Millage was with Resorts International Holdings since 2005 as the Senior Vice President and Corporate Controller for the last three years and prior to that the Assistant General Manger and CFO for their Resorts East Chicago property. Prior to that Mr. Millage was the Managing Director of Casino Operations for the Nevada region for Hyatt Gaming Services from 2004 to 2005. Mr. Millage has over 18 years of experience in the casino and hospitality industry with Resorts International, Hyatt Gaming Services and Harrah's Entertainment serving in key financial positions combined with General Management responsibilities. Mr. Millage graduated from the University of Missouri-St. Louis with a B.S. in Accounting.
Board of Directors
Michael G. Corrigan. Mr. Corrigan is a media and entertainment professional who has operated as a self-employed independent consultant since 2004. In that period, he also served as Chief Financial Officer of Goldhil Homae Media International in 2006. From 1999 to 2004, Mr. Corrigan was a co-founder of Shelbourne Capital Partners LLC, a boutique advisory firm. Prior thereto, Mr. Corrigan was a senior partner in the Entertainment, Media and Communications practice of Price Waterhouse LLC. Mr. Corrigan is a member of the Board of Directors of ACME Communications Inc. and was a member of the Board of Directors of Atari Inc. from 2004 to 2007. Mr. Corrigan is a graduate of the Law School of Trinity College, Dublin, Ireland. Mr. Corrigan has served as a member of the Board of Managers of TEH since June 6, 2008.
Glenn C. Christenson. Mr. Christenson served as Chief Financial Officer of Station Casinos Inc. from 1989 to March 30, 2007, Treasurer from 1992 to March 30, 2007, and also served as its Principal Accounting Officer until March 30, 2007. From 1983 to 1989, he served as a Partner of Deloitte Haskins & Sells (now Deloitte & Touche), where he served as Partner-in-charge of Audit Services for the Nevada practice and National Audit Partner for the Hospitality Industry. He serves as a Director of Nevada Community Bank, Sierra Pacific Power Co. and Nevada Power Co. He has been a Director of NV Energy, Inc.(alternate name is Sierra Pacific Resources) since May 7, 2007 and First American Corp. since April 14, 2008. Mr. Christenson served as a Director of Station Casinos Inc. from 1993 to December 9, 2003. Mr. Christenson serves as a Member of the Board of Trustees of the Las Vegas Chamber of Commerce and as a Director for the Nevada State College Foundation Board. Mr. Christenson has served on the Board of Directors of the Nevada Resort Association and as the Chairman of the Nevada Resort Association's IRS Liaison Committee. He was named to the Nevada Society of CPAs Hall of Fame for Business and Industry in 2002 and was designated one of the Most influential Businessmen in southern Nevada by In Business magazine in 2002. Most recently, in a poll of investors and analysts conducted by Institutional Investor Magazine, Christensen was named the top Chief Financial Officer in the gaming and lodging industry in 2006 and 2007. In January 2009, he was named chairman of the National Center for Responsible Gaming. Mr. Christenson is a Certified Public Accountant. He holds an undergraduate degree in business administration from Wittenberg University and an MBA in finance from The Ohio State University.
Stephen Deckoff. Mr. Deckoff is the Managing Principal of Black Diamond Capital Management, L.L.C. and is responsible for all portfolio management and business operations. Prior to the founding of BDCM in 1995, Mr. Deckoff was a Senior Vice President of Kidder, Peabody & Co. Inc., formerly a wholly-owned subsidiary of GE Capital Corporation. At Kidder, Mr. Deckoff was head of the Structured Finance Group. Under Mr. Deckoff's direction, the group was responsible for new issue origination, transaction structuring and trading for all non-first mortgage related assets. Prior to joining Kidder in December 1993, Mr. Deckoff was a Managing Director in the Structured Finance Group at Bear Stearns & Co., Inc. where his responsibilities included all phases of transaction development and group management. Before joining Bear Stearns, Mr. Deckoff had worked in the Structure Finance Department of Chemical Securities, Inc. and the Fixed Income Research Department at Drexel Burnham Lambert. Mr. Deckoff has a B.S. in Operations Research from the Engineering School at Cornell University.
Carl C. Icahn. Mr. Carl C. Icahn has served as chairman of the board and a director of Starfire Holding Corporation ("Starfire"), a privately-held holding company, and chairman of the board and a director of various subsidiaries of Starfire, since 1984. Since August 2007, through his position as Chief Executive Officer of Icahn Capital LP, a wholly-owned subsidiary of Icahn Enterprises L.P. ("Icahn Enterprises"), and certain related entities, Mr. Carl C. Icahn's principal occupation is managing private investment funds, including Icahn Partners LP, Icahn Partners Master Fund LP, Icahn Partners Master Fund II LP, and Icahn Partners Master Fund III LP. Prior to August 2007, Mr. Carl C. Icahn conducted this occupation through his entities CCI Onshore Corp. and CCI Offshore Corp., since September 2004. Since November 1990, Mr. Carl C. Icahn has been chairman of the board of Icahn Enterprises G.P. Inc., the general partner of Icahn Enterprises. Icahn Enterprises is a diversified holding company engaged in a variety of businesses, including investment management, metals, real estate, and home fashion. Mr. Carl C. Icahn was chairman of the board and president of Icahn & Co., Inc., a registered broker-dealer and a member of the National Association of Securities Dealers, from 1968 to 2005. From October 1998 through May 2004, Mr. Carl C. Icahn was the president and a director of Stratosphere Corporation, the owner and operator of the Stratosphere Hotel and Casino in Las Vegas, which, until February 2008, was a subsidiary of Icahn Enterprises. From September 2000 to February 2007, Mr. Carl C. Icahn served as the chairman of the board of GB Holdings, Inc., which owned an interest in Atlantic Coast Holdings, Inc., the owner and operator of The Sands casino in Atlantic City until November 2006. Mr. Icahn has served as chairman of the board and as a director of American Railcar Industries, Inc. since 1994. Mr. Carl C. Icahn has been chairman of the board and a director of XO Holdings, Inc., a telecommunications services provider, since February 2006, and of its predecessor from January 2003 to February 2006. Mr. Carl C. Icahn has served as a Director of Cadus Corporation, a company engaged in the ownership and licensing of yeast-based drug discovery technologies since July 1993. In May 2005, Mr.Carl C. Icahn became a director of Blockbuster Inc., a provider of in-home movie rental and game entertainment. From September 2006 through November 2008, Mr. Icahn was a director of ImClone Systems Incorporated ("ImClone"), a biopharmaceutical company, and from October 2006 through November 2008, he was the chairman of the board of ImClone. In August 2007, Mr. Carl C. Icahn became a director of WCI Communities, Inc. ("WCI"), a homebuilding company, and since September 2007, has been the chairman of the board of WCI. In December 2007, Mr. Carl C. Icahn became a director of Federal-Mogul Corporation ("Federal-Mogul"), a supplier of automotive products, and since January 2008, has been the chairman of the board of Federal-Mogul. From August 2008 to October 2009, Mr. Icahn was a director of Yahoo! Inc., a company that provides internet services to users, advertisers, publishers and developers worldwide.
Mr. Carl C. Icahn received his B.A. from Princeton University.
James L. Nelson. Mr. Nelson has served as a director of Icahn Enterprises GP since June 2001. Since December 2003, Mr. Nelson has served as a director of AEP. From May 2005 until November 15, 2007, Mr. Nelson served as a director of Atlantic Coast. From 1986 until the present, Mr. Nelson has been Chairman and Chief Executive Officer of Eaglescliff Corporation, a specialty investment banking, consulting and wealth management company. From March 1998 through 2003, Mr. Nelson was Chairman and Chief Executive Officer of Orbit Aviation, Inc., a company engaged in the acquisition and completion of Boeing Business Jets for private and corporate clients. From August 1995 until July 1999, Mr. Nelson was Chief Executive Officer and Co-Chairman of Orbitex Management, Inc., a financial services company in the mutual fund sector. From August 1995 until March 2001, he was on the Board of Orbitex Financial Services Group. Mr. Nelson currently serves as a director and Chairman of the Audit Committee of Viskase Companies, Inc., a company in which Mr. Icahn, directly or indirectly, either (i) controls such company or (ii) has an interest in such company through the ownership of securities. From January 2008 through June 2008, Mr. Nelson served as a director of Shuffle Master, Inc. In March 2008, Mr. Nelson was appointed a director of Pacific Energy Resources Ltd., an energy producer. In April 2008, Mr. Nelson was appointed a director of Cequel Communications, an owner and operator of a large cable television system.
Hunter C. Gary. Mr. Gary has served on the board of directors of American Railcar Industries, Inc. since 2008. Since 2003, Mr. Gary has been employed by Icahn Associates Corp. and an affiliate of Icahn Enterprises. Prior to joining Icahn Associates, Mr. Gary worked at Kaufhof Warenhaus AG, a subsidiary of the Metro Group, a retailing and service company, from 1997 to 2002, most recently as a managing director. Since 2007, Mr. Gary has served as a director of WestPoint International, Inc. as well as Motricity, Inc. Mr. Gary is married to Mr. Carl C. Icahn's wife's daughter. Mr. Gary received a B.S. with Senior Honors from Georgetown University as well as a Certificate of Executive Development from Columbia Graduate School of Business.
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