A Florida developer and a Southern New Jersey university are looking to spearhead a renaissance in Atlantic City.
Wellington, Fla.-based Polo North Inc. and Stockton University in Galloway Township, N.J. announced plans on April 3 to invest more than $500 million in the seaside city, which is operating under an emergency manager after casino revenue plunged almost by half over the past decade.
The announcement, which came a day after Polo North received court approval to buy the recently-shuttered Revel casino for $82 million, is being coined the Phoenix Project and involves transforming the gambling hub with "next generation" resorts and a university setting.
"As the name of the project signals, the Phoenix rises out of the ashes to be reborn and will evolve to include diversified collection of projects including eight parts designed to show that the American dream is still alive and well," said Polo North president Glenn Straub in a statement announcing the initiative. "A warm thank you to the people of Atlantic City for giving both boards the opportunity to work on the transition project."
The effort comes after the Atlantic City government was granted a 60-day extension on a $40 million state loan that was due on March 31 and a lawsuit was filed by the Borgata Hotel Casino that could challenge future bond sales. Atlantic City is facing a projected $101 million budget gap in 2015. The city's emergency manager Kevin Lavin released a report on March 24 recommending cutting expenses by $10 million this year as well as negotiating with key stakeholders to help create "fiscal stability." Moody's downgraded Atlantic City's $344 million in general obligation debt to Caa1 in late January citing concerns that the debt may be headed for a restructuring.
"Atlantic City needs diversification and this plan could help that, but it is an ambitious plan that will face some challenges," said Michael Paladino, head of Fitch Ratings' gaming, lodging and leisure group. "It will be a challenging plan to execute at its fullest."
Components of the Phoenix Project include redeveloping Atlantic City's municipal airport, building an extreme sports complex that could host ESPN's X-games, two marinas that have capacity to hold large yachts, a "world-class" multipurpose equestrian complex, indoor and outdoor water parks, and a pier project featuring laser light shows. The ambitious plan also would provide high-speed ferries and helicopters connecting Manhattan and Atlantic City along with a new medical complex, "high-end" independent living facilities, and an entertainment hub.
Straub didn't respond to requests for comments about the proposal. Among the many properties he has previously purchased are the Palm Beach Polo Golf and Country Club, the Heart of Palm Beach Hotel and the Tesoro Club. The Revel, which opened in April 2012, was among four casino closures in Atlantic City last year.
Stockton, a public college rated A2 by Moody's Investors Service, is slated to open its new Island Campus at the former Showboat Casino Hotel site in Atlantic City this fall. Polo North deposited $26 million in escrow for Stockton, which covers the $18 million purchase price the university paid for the former casino property as well as other costs incurred such as maintenance, utilities, employees and insurance.
Stockton has an 18-month first right to purchase or lease the property for educational purposes. A contingency in the deal allows the university a 90-day period to terminate the contract as it evaluates potential legal challenges from the neighboring Trump Taj Mahal, which has tried to block the bid because it doesn't want college students living next to its casino.
"We expect to be able to move forward together under a plan that will revitalize Atlantic City, including transforming Revel," Stockton president Herman Saatkamp said in a statement. "Stockton is pleased to have so many strong partners in the common goal of leveraging the economic and social development of Atlantic City and the region."
Atlantic City Mayor Donald Guardian didn't respond to calls seeking comment on the Phoenix Project. Since being elected as the city's first Republican mayor in nearly a quarter century a year and a half ago, Guardian has made attracting non-casino businesses a priority and attended a grand-opening for a new 85,450-square-foot Bass Pro Shops Outpost store with 200 employees on April 15. A new 16,000-square-foot development from BET Investments featuring upscale stores is also scheduled to open this year next to the Boardwalk Hall sports arena.
Professor Marc Pfeiffer, assistant director of Rutgers University's Bloustein Local Government Research Center, said past proposals aimed at improving Atlantic City have failed to be properly executed. The city has also been hurt by bad timing, including an effort to improve Baker Field in 2007 just before the Great Recession hit.
"We have seen proposals and plans in the past but it all comes down to timing and execution," said Pfeiffer. "It is a great idea, but there have been good ideas before and they have had trouble going forward."
Moody's issued a January report detailing Atlantic City's need to expand beyond gaming. The report noted that casinos make up roughly 75% of the city's tax base with revenues from this industry declining 46% from 2005 to 2014 due in large part to increased regional competition. Total Atlantic City visitors also dropped from 31 million in 2009 to 25 million in 2013, according to Moody's.
"Any diversification from a reliance on gaming revenue or casinos is positive," said Moody's analyst Josellyn Yousef. "Economic diversification will be a positive."
Howard Cure, director of municipal research at Evercore Wealth Management, said creating other offerings beyond gaming is vital for Atlantic City's future and that the Phoenix Project may increase tourism dollars while giving a boost to casino business. He added that one aspect of the proposal that could strike a balance between family entertainment and gambling is the water park for children and adjacent casinos for the parents.
"You need to accommodate families while still making casinos viable," said Cure. "They need to do some diversification and this could certainly help, but there is a lot of competition."
