New Owner of Atlantic City's Tropicana Somewhat of a Surprise

Tropicana Atlantic City Casino & Resort is set to come under new ownership, just over one year after owner Tropicana Entertainment LLC filed for Chapter 11 protection. But it's not a big-name gaming company that will take over the property's reigns. The United States Bankruptcy Court in Camden, N.J., has green-lighted a "stalking horse" asset purchase agreement calling for pre-petition lenders—a group that includes billionaire investor Carl Icahn's Icahn Capital—to take hold of the asset in return for forgiving $200 million of debt owed by Tropicana.

"It's a great purchase for the creditors and Carl Icahn," Michael R. Parks, first vice president with real estate services firm CB Richard Ellis' Global Gaming Group, told Commercial Property News; the firm is not involved in the transaction. "It goes to show how tough the capital markets are right now; with the lack of financing, there's no money available. For a quality asset like the Tropicana to trade at that value is a tremendous purchase."

Tropicana Atlantic City, which opened its doors in 1981, sits right along the famed Boardwalk and features over 2,100 guestrooms and approximately 140,000 square feet of gaming space. The property's troubles reached a climax in December 2007 when the New Jersey Casino Control Commission refused to renew the casino's license. Retired New Jersey State Supreme Court Justice Gary S. Stein, state-appointed trustee and conservator of the asset, was immediately charged with the task of orchestrating its disposition. A bevy of hopeful buyers soon emerged, including private investment firm Colony Capital LLC, which made an $850 million offer in early 2008. But the economic and gaming industry tides turned and big-ticket offers fell by the wayside. Tropicana filed for bankruptcy in May 2008 and in April 2009, the company initiated the Section 363 sale process under the U.S. Bankruptcy code with the intent of selling for a minimum $200 million. An auction would have taken place had the aforementioned pre-petition lender group not been the only bidder.

The pre-petition lenders, also referred to as the Secured Parties, have only just begun the long process of finalizing the arrangement that will allow them to take possession of the hotel-casino destination. The group has already filed with the New Jersey Casino Control Commission, and the attainment of further approvals will follow before the transaction gets the final go-ahead. The deal is on track to close before the end of 2009. In the meantime, the dice continue to roll at Tropicana Atlantic City.

Whether the casino will be successful under its new ownership, given the downtrodden state of the gaming industry, is anyone's guess. "Hopefully, the worst is behind us, but there will still be a tough few months for some," Parks said. "MGM is out of the woods, but Herbst might be going the way of Tropicana." Herbst Gaming Inc. filed for bankruptcy protection in March. "We hope the market has reached the bottom, and we'll start to see a slow recovery and better times ahead."

Source: Commercial Property News