Pinnacle’s casino project looks dicey

Atlantic City – The sprawling dirt site where Pinnacle Entertainment’s USD 1.5 billion megaresort is supposed to rise will remain vacant for at least two more years.

Construction will start no earlier than 2010 – if ever – on the now-cleared land where the old Sands Casino Hotel once stood, Pinnacle Chairman Dan Lee said Wednesday while giving a cautious update on the project.

Lee put the odds of Pinnacle ever building the new casino at 50 percent, conceding that the property may be sold and his company could pull out of Atlantic City if the credit crisis continues.

„Frankly, we’ll see if it even makes sense to go ahead in Atlantic City,“ he told gaming analysts during a conference call to discuss Pinnacle’s first-quarter earnings.

Lee noted that it will take at least a year or two just to arrange the financing, a difficult task right now amid the global credit crunch that has all but dried up funding for major casino projects.

Securing regulatory approvals and lining up the tenants for the retail shops and other nongaming attractions in the casino complex also would take as long as two years to complete, according to Lee.
„Atlantic City is quite a ways down the road,“ he said.

Pinnacle originally planned to start construction this year, with a grand opening in late 2011 or early 2012. Three months ago, Lee disclosed that Pinnacle would delay construction until 2009 because of turmoil in the credit markets. On Wednesday, the company pushed back the timetable again, to 2010.

„We’re somewhere within that timeframe, but because of the credit markets, it’s hard to pin down,“ Pinnacle spokeswoman Pauline Yoshihashi said. „We’re still in the same ballpark, but it’s a pretty big ballpark. It will be 2010 at the earliest.“

The Atlantic City project, Yoshihashi said, would follow construction of The Casino at Riviere, a USD 250 million gaming complex that Pinnacle plans to open in 2010 in Baton Rouge, La.

Lee outlined four scenarios for the vacant land in Atlantic City. The company hopes to build a massive, Las Vegas-style casino overlooking the Boardwalk.

Pinnacle’s first choice is to develop the casino by itself. Another option is to sell the land, which Lee characterized as remote because of the big tax bill the company would incur. Other less likely possibilities include taking on a partner for a joint venture or having another company buy Pinnacle Entertainment if it wants to enter the Atlantic City market, Lee said.

Pinnacle is close to completing conceptual designs and expects to refine the development costs for the casino in coming months. Previously, it estimated the cost at USD 1.5 billion. Design work alone will carry a USD 100 million price tag, Lee said.

In giving a sneak preview of the project, Lee said Pinnacle is thinking of building as many as 3,000 hotel rooms and an array of retail-entertainment attractions rivaling those at the Venetian Resort Hotel Casino in Las Vegas.

„This is a much more competitive environment. We need to have the ability to build something that is comparable to the Borgata or Harrah’s Marina,“ he said of two of Atlantic City’s top-tier casinos.

Lee said Pinnacle has ruled out making a bid for the Tropicana Casino and Resort, a property it tried to buy in 2006 but lost out to Columbia Sussex Corp. Tropicana was stripped of its license in December and is now up for sale following a tumultuous year of declining revenue, regulatory violations and mass layoffs under Columbia’s ownership.

„We’ve made our bet in Atlantic City,“ Lee said of Pinnacle’s interest in its own project instead of the Tropicana. „I think we’ve made a big enough bet and we don’t need to up it again.“

Columbia Sussex affiliate Tropicana Entertainment LLC filed for Chapter 11 bankruptcy protection on Monday for nine of its casinos in Nevada, Mississippi, Louisiana and Indiana. Atlantic City’s Tropicana casino, no longer owned by Columbia and now under the control of a state-appointed conservator, was not included in the bankruptcy filing.