Proposed A.C. Casino could be scrapped

February 26, 2008 2:17:02 PM PST
The chairman of Pinnacle Entertainment on Tuesday said the company may abandon its $2 billion mega-casino project on the Boardwalk if credit markets don't improve.

While stressing that the company still expects lending conditions to improve before the anticipated groundbreaking in late 2009, chairman and CEO Daniel Lee said Pinnacle could conceivably scrap the project if funding remains difficult for an extended time.

"I've been asked, 'How the hell are you going to build in Atlantic City?"' Lee said on a conference call to discuss the company's year-end earnings. "The answer is if credit markets don't improve, we won't build. We're not going to go broke building in Atlantic City."

However, Lee said he fully expects markets to improve long before the point where a decision on whether to scrap the Atlantic City project becomes necessary.

"I'm confident the credit markets will improve before the architects are done designing the building," he said.

Pinnacle bought the former Sands Hotel Casino and demolished it last October to make way for a large casino-hotel project on the Boardwalk. The as-yet unnamed project is still in the design stage.

"We're still at the point of compiling our dreams of what can go into that property, and they're pretty big," Lee said. "It's a big part of this company's future."

Even if markets don't improve quickly, Lee said the company could wait awhile to begin the Atlantic City project.

"We don't have a gun to our heads," he said.

Steve Capp, Pinnacle's chief financial officer, also said he expects credit markets to come back "as they have cyclically in the past."

But Lee added, "The credit market is essentially closed. We have competitors with half-built buildings that they can't finish. We have a policy of not starting something unless we're relatively sure we have the money to finish it."

Should the markets not rebound, he said, "The whole question of if and when you're going to build in Atlantic City is going to become moot."

Lee said Pinnacle's land in Atlantic City is not for sale, and that there are no plans to put it on the market. But if that became necessary, he said, the proceeds from a sale could help fund other Pinnacle projects elsewhere in the country.

He also said the company would look into taking on a partner for projects including Atlantic City if it became necessary.

Kim Townsend, chief executive officer of Pinnacle Atlantic City, said plans for the casino are still moving forward, including the acquisition of land around it.

Lee said in November that Pinnacle might be interested in building a second Atlantic City casino at the former Bader Field airport site, but Townsend said that interest has dissipated, given the current market conditions.

"The Boardwalk needs to be completed first," she said. "We feel strongly the Boardwalk is the place to be."

Pinnacle most recently opened Lumiere Place, a casino-hotel in St. Louis, in December.

It also owns casinos in Nevada, Louisiana, Indiana, Argentina and the Bahamas.