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Bailey-Gomes Team Set to Give Atlantic City a Boost

Posted on September 1st, 2010

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Despite the obvious decline of the value of property in Atlantic City, there is a glimmer of hope in the area’s oldest gambling facility. Resorts Atlantic City, the oldest casino in Atlantic City and the state of New Jersey, was on the brink of closing down as only last year, its owners have failed to make payments on a loan. However, to the rescue, came a new team composed of Morris Bailey, a real estate developer based in New York and Dennis Gomes, an operator long known in gambling circles both on the Shore and Las Vegas, have claimed ownership of the facility and further asserts that they have the capacity to make profits out of the facility before one year passes.

One of the keys factor that will support the claim of the Bailey and Gomes team is that the risk they have undertaken is notably less than the risks that the facility’s former investor had to take. The Resorts Atlantic City only cost them $35 million, according to a reliable insider of the ownership transaction. That is definitely a discount, but then the facility has not actually been performing well at all. For the past two years and a half, the casino, which was launched in 1978, incurred operational losses amounting to $59 million.

The plight of Resorts Atlantic City can be seen as mirroring the condition of the entire area, which has experienced a noticeable decline in value of most of its properties. In 2001, Resorts was bought by Colony Capital LLC for $140 million. Three years later, the company shelled an additional $110 million to construct a new hotel. Trouble began to brew in 2007, when they had to refinance the property for $360 million in loans, which they sold to investors. But at that time, plans to invest in Atlantic City still amounted to billions, or so according to projections by investors. Since the start of recession woes, however, these projects have been shelved, and casino facilities are now being made available at slashed prices. Among the huge properties available is a half of Borgata which is currently the Shores’ most profitable property. The 50 percent stake is being held by MGM Resorts International. More bad news about the area is available, as capital expenditures have dropped from $963 billion in 2007 to $85 million in 2009. Revenue has continued its downward trend, thus making potential and current investors cautious about further investing.

In an interview, Mr. Bailey gave a positive outlook. Although he thinks that the city may never go back to its peak in casino gaming, the value structure of Resorts Atlantic City will allow him and Mr. Gomes to make some profits. Mr. Bailey is a veteran in the fast food business, having owned 52 franchises of Burger King in the state. He had developed some properties for residential and office in New York, but has ceased since 2001 when real estate prices in Manhattan increased. On the other hand, Mr. Gomes worked in casino regulation with the government before operating casinos under the company of Steve Wynn in both Atlantic City and Las Vegas. In 1995, he was embroiled in a tiff with Donald Trump, who claimed that he fired Gomes from operating his Taj Mahal casino, while Gomes claimed that he quit from his position.

The Bailey and Gomes partnership expects to gain more profits from operating the facility as they have no concrete plans on majorly renovating the casino. What they say they will invest heavily on will be adding attractions that will attract more visitors by inviting an entertainer that will craw a following and a new concept for a restaurant. Some casino speculators are not as positive as Bailey and Gomes, as they think a fast turnaround could only be performed if more investment will be done. Onlookers say that the decline of performance of Atlantic City casinos is set to continue. Revenues started to decrease after casinos in Pennsylvania started chipping customers away from the Shore. Now that Pennsylvania casinos have added table games and two more casinos are slated to open in September. But the fact that a new investor has taken interest in an old AC property is a sign that things may not be all that bad in the area, according to casino onlookers.