Analyst says megaresort is future of Sands site
By DONALD WITTKOWSKI Staff Writer, (609) 272-7258
Published: Tuesday, August 29, 2006

ATLANTIC CITY — The buyer of the Sands Casino Hotel likely will tear down the existing casino to make way for a $1 billion megaresort that would take about three years to build, according to a gaming analyst.

Attorneys for the Sands' owner, billionaire investor Carl C. Icahn, have confirmed that negotiations are under way to sell the casino, but have not yet disclosed the names of potential buyers.

Gaming analyst George L. Smith III of Davenport & Co. said Las Vegas-based Pinnacle Entertainment Inc. appears to be the front-runner for the Sands. Pinnacle has been looking for other ways to enter the Atlantic City market after losing out in May to Columbia Sussex Corp. in a $2.75 billion bidding war for Aztar Corp., parent company of Tropicana Casino and Resort.

“While certainly not a guarantee, we believe Pinnacle may be the most likely buyer,” Smith wrote in a report to investors.

Smith added that Pinnacle probably would demolish the aging Sands to build a new casino. Icahn's American Real Estate Partners investment group recently acquired oceanfront property next to the Sands that could be combined with the existing casino site for a $1 billion megaresort, Smith noted.

“Should Pinnacle prove to be the buyer, we believe it would choose to tear down the existing facility and use excess real estate to build a much larger property,” he said.
Providing the land for expansion is the 7.7-acre former Traymore Hotel site, which Icahn's group bought in May for $61 million. The Sands also has worked out a $10.6 million deal with the state Casino Reinvestment Development Authority for control of the city's post office building across the street on Pacific Avenue.

The 70-year-old post office would be demolished and its operations relocated two blocks away on Atlantic and Indiana avenues, according to plans. Once the Sands is torn down, that site could be incorporated with the Traymore property and the post office land to create space for development of a new casino.

Demolition of the Sands likely would put most of the casino's approximately 2,000 gaming and hotel employees out of work while construction continued for three years on the new resort.

The Sands, the city's smallest casino, has been under Icahn's control since he rescued the property from bankruptcy in 2000. Despite its ownership by the billionaire casino mogul, the cramped and deteriorated 620-room casino hotel has been overshadowed by its larger competitors on the Boardwalk.

“Given its age, room shortage, lack of capital investment and new competition in the market, the property has struggled a bit,” Smith said. “We believe it has gotten to a point where it needs to be expanded/upgraded or completely torn down.”

Rumors mounted for months that the Sands was on the market, but there was no official confirmation until a July 12 bankruptcy court hearing involving GB Holdings Inc., the casino's former parent company and now a minority owner.

Attorneys for Icahn and GB Holdings are quoted in recently released court transcripts that talks were being held to sell the Sands, but they declined to reveal the name of the would-be buyer. The asking price is said to be $250 million.

In addition to Pinnacle Entertainment, another potential buyer of the Sands is said to be the Cosmopolitan Hotel Resort & Casino, which is currently building a $2 billion development on the Las Vegas Strip but is eager to enter the Atlantic City market. Representatives of Pinnacle and the Cosmopolitan declined to comment about the Sands.

A third company, Penn National Gaming Inc., considered buying the Sands but concluded that the price was too high.

“Quite candidly, we're not a buyer at those prices,” Penn National Chairman Peter M. Carlino told gaming analysts in a company conference call. “Would we be interested in that property? Absolutely. Would we pay what is thought to be the purchase price? Not a chance.”