Sands sold, will close
Pinnacle plans to build $1.5B. megaresort casino hotel
By J. STAAS HAUGHT Staff Writer, (609) 272-7253
Published: Wednesday, September 6, 2006
ATLANTIC CITY — A Las Vegas gaming company announced Tuesday it is buying the Sands Casino Hotel and will tear it down to build a billion-dollar-plus resort.

Pinnacle Entertainment Inc. has agreed to pay $250 million, plus $20 million for tax benefits and real estate assets, for Atlantic Coast Entertainment, the company that owns the 26-year-old Sands and the adjacent site of the former Traymore Hotel.

Pinnacle Chairman and CEO Daniel R. Lee said the company — which owns casinos in Nevada, Louisiana and Indiana — is looking to build a megaresort-style casino rivaling the Borgata Hotel Casino & Spa on the 18-acre parcel.

“We haven't gotten our sharp pencils out just yet, but you don't buy a piece of land in Atlantic City for $250 million just to put up a small project,” Lee said in an interview with The Press of Atlantic City. “If you look at the opening of the Borgata, or even the developments at the Tropicana, those are 2,000-room hotel casinos. I think you can expect it's going to be in that same league.”

Lee said the project will likely cost more than $1.5 billion, with construction starting in mid-2008.

“The Borgata, when it was built, cost $1.1 billion. That was a few years ago. With construction inflation, you're probably talking about $1.5 billion. That's a very rough guess, but I think it's probably close,” Lee said. “That's to do it right, and you really don't want to do it wrong.”
The purchase agreement calls for the 620-room casino hotel, the city's smallest, to be shut down within 70 days of signing the agreement, or about Nov. 13.

The approximately 2,100 Sands employees were told Tuesday morning that the casino will close by mid-November, said Sands President and CEO George Toth, calling the announcement a mix of good and bad news.

“One, we have a major development coming to Atlantic City. That's great for everybody, and we're really excited about that. But, two, you have some 2,000 employees who are going to be out of work and that's going to be rough on a lot of people. And, three, we have the closing of a fabled Atlantic City gaming house, which we plan to do in style and in a celebratory manner throughout the next 60 days,” Toth said.“It is a sad day, and it is a happy time for all of us. This is a great city with great things happening.”

The president of Local 54 of UNITE-HERE, the casino and hotel union, said he and his members are holding out hope Pinnacle will opt to keep the Sands open in the interim.

“We're certainly happy to see Pinnacle is willing to invest in Atlantic City, but we'd rather not see the Sands shut down until the new casino is open,” Robert McDevitt said. “We're hoping they'll reconsider their plan.”

McDevitt said closing the casino would put too great a financial strain on about 2,000 families and the rest of the industry might not be able to absorb all of the displaced workers quickly enough.

“We think it would be a better idea to build new towers and gaming space and offer existing employees jobs there. And when the time comes, tear the Sands down to make way for more development,” McDevitt said.

Lee, though, said that plan just isn't feasible.

“It sounds easy, but it really isn't easy. Sands fits in the middle of the lot that we plan on building on entirely. It is making money, but it doesn't make a lot of money now. If you look at going into the off-season, the minute it becomes clear we are buying the property, employees start leaving, service starts dwindling, you can't offer the same things to customers and they start wondering if they should bother coming back. During that time the business starts to deteriorate,” Lee said.

“We would be so distracted by trying to operate this casino that it would put off the date at which we could open a bigger and better one,” he said. “Everybody is better off if we simply close it now and are very generous with our severance package and do everything we can to help people find other jobs.”

Lee said his company's human resources department is already developing training sessions to help workers create resumes, brush up on interview skills and look for jobs. The company will sponsor job fairs advertising work at other Atlantic City casinos and will offer to some employees positions at its other casino properties, including two under construction in the St. Louis area.

Inside the casino, employees had a mixed reaction to the news.

Pit manager Lynn Zerillo, who started as a dealer at the Sands in 1980 when she was fresh out of high school, said she is worried about her future.

“I hate to see this day come,” Zerillo said.

Zerillo said she plans take a couple of months off to spend time with her parents and siblings, and then will look for another casino job.

“It's all I know,” she said. “I'm heartbroken.”

Casino employees aren't the only ones affected by the new plans. A few local establishments may give way to Pinnacle Entertainment's ambitious development plan.

“I'm pretty much reading between the lines from what I read in the Atlantic City Press,” said Phil Bonelli, a bartender at the Poseidon Bar & Grill at Pacific and Kentucky avenues. “This is the only thing standing in the way of everything else, so it only makes sense this is going to come down, too.”

George Siganos, president of Siganos Management, said the Siganos Plaza, which fronts the Sands property along the Boardwalk, will probably only stay open for another two years or so.

Siganos, who owns four of the stores in the plaza and subleases the others in the block he renovated in 2003, said the property is included in the Pinnacle deal.

“We'll lose some money to take the stores down. Somebody's going to lose their business, but after all these years, the time has come to fix up Atlantic City,” Siganos said.

Oliver Cook, an assistant professor of economics at Richard Stockton College said it's going to be painful for a lot of people.

“It's bad news for sure — maybe not for Pinnacle and company — but there's no doubt it will be a drag on the regional economy going forward,” he said.

Cook said while the area has seen marked job growth recently, it isn't prepared to absorb that many hospitality and service jobs at one time.

“That's a pretty heavy lift even for the casino industry. That's not a couple of jobs here and there,” he said. “Depending on how long it takes to build the new casino, you could start to see the multiplier effect — how those lost jobs are affecting other areas.”

Lee said the project, once under construction, could span several years.

“You look at this property and you say, ‘Here's a building that's not going to stand there anymore.' That's a lot of work and frankly, I kind of wish the Sands wasn't there and we could just build a new property on the site without having to tear one down,” he said.

Staff writer Elaine Rose contributed to this report.