The gambling subsidiary of Morgan Stanley has acquired 20 acres on the Boardwalk to develop what will be Atlantic City’s 13th casino.
The Wall Street firm confirmed it paid about $ 74 million for the land, which had been controlled by a group of developers and the Atlantic City Housing Authority.
A Morgan Stanley official said yesterday that the company intended to choose a casino operator to build and operate the previously reported $ 1 billion casino hotel on the site that abuts the Showboat casino and the Bella Condominiums high-rise tower in the city’s rapidly developing South Inlet area.
„Morgan Stanley will act as the financial sponsor for the project,“ Michael C. Garrity, director of MS Gaming Cos. Holdings Inc., said in an interview. „We will recruit an experienced gaming operator to develop and manage the project.“
Garrity described MS Gaming as the principal vehicle by which Morgan Stanley pursues investments in the gambling industry.
He would not name the firm with which MS is negotiating, and the New Jersey Casino Control Commission, which regulates Atlantic City’s casino industry, has not received any application for a new casino license.
But real estate professionals and gambling industry officials familiar with Morgan Stanley’s plans say a leading contender is Hard Rock International Inc.
„Hard Rock Hotels & Casinos is currently looking at a number of development opportunities throughout the world,“ Hard Rock said in a statement yesterday. „As a policy, we never comment on such potential opportunities.“
Hard Rock, which is part of the London-based Rank Group P.L.C. gambling and entertainment business, operates 121 cafes worldwide and two U.S. casinos in Hollywood, Fla.; and Tampa, Fla.
A developer familiar with the negotiations said Hard Rock representatives had been in town on many occasions over the last several weeks and had met with Atlantic City Mayor Robert W. Levy and members of City Council, including Council President Craig Callaway.
„They’re making the rounds, and meeting the people they have to see as to what it takes to qualify for a license, and to go over the type of facility they want to build,“ said the developer, who asked not to be identified. MS Gaming said the earliest it could open would be 2009.
Those familiar with the transaction said the land deal closed late Tuesday night, with Morgan Stanley reaching agreement with North Beach Holdings L.L.C. and the Atlantic City Housing Authority for the two parcels totaling 20 acres. The funds were disbursed yesterday.
North Beach Holdings, which is a group of local developers, assembled the 20-acre parcel to sell to Morgan Stanley.
„It is an exciting day for Atlantic City,“ said Tom Scannapieco, a key partner in North Beach Holdings. „The development of that 20-acre tract into the 13th casino will have a great impact on the North Beach area of Atlantic City.“
A housing agency official said MS Gaming was also obligated to produce a condo tower, or casino hotel, or both, at a cost of at least USD 80 million under the terms of the original agreement made when North Beach Holdings acquired the land.
MS Gaming has already made a substantial investment in another gambling operator: Donald Trump. Last May, Trump’s casino company, Trump Entertainment Resorts Inc., emerged from bankruptcy protection with a USD 500 million line of credit from Morgan Stanley as part of a restructuring. The money is for Trump to make improvements to his three Atlantic City casinos and to expand into new markets, including Pennsylvania. In exchange, Morgan Stanley received 15 percent ownership of Trump Entertainment, or 5.5 million shares.
In addition, MS Gaming is listed as a member of Keystone Redevelopment Partners L.L.C., which is behind Trump’s proposed Philadelphia casino, the USD 350 million TrumpStreet Casino & Entertainment Complex, for the city’s East Falls section. Trump is competing against four other operators for one of two city gambling licenses.
MS Gaming is also an investor in the proposed $ 300 million Crossroads Gaming Resort & Spa L.P. in Adams County, Pa.
With its plans to develop Atlantic City’s newest casino, Garrity said MS Gaming would not be in direct competition with Trump’s three casinos there.
Besides a hotel, the new casino would include luxury stores, restaurants and other attractions.
„We believe any investment will only create more excitement at the northern end of the Boardwalk, and it will clearly be to the benefit of Trump and the market as a whole,“ Garrity said in an interview in early April, the day after The Inquirer first reported plans for a 13th casino in Atlantic City.
„We are believers in Atlantic City and that the paradigm is changing,“ Garrity said. „The largest players in the industry are voting with their wallets.“