Comparison shopping in AC

Yesterday I wrote a bit about the numbers behind the proposed mini-casinos considered for Atlantic City. Now, with news that Hard Rock is talking about spending $300 million to build a mini-casino, I thought I’d do a little number-crunching and learn if you’d be better off using that money to buy an existing property or build a mini-casino.

Trump Marina’s been for sale; that’s no secret. There’s a $75 million offer on the table for it. Financial analyst William Hardie now values the property at $24 million. We can argue about whether that’s a fair assessment–Trump certainly would–but let’s say we’ve got a choice between buying Trump Marina for even $80 million or building a mini-casino for $300 million. Which should we take?

In 2008, Trump Marina had 72 table games and 1,983 slots, with a 78,535 square-foot casino.

The mini-casino would be restricted by law to 20,000 square feet, which I say pencils out to roughly 24 table games and 512 slot machines.

Right off the bat, something should be obvious: for nearly four times the cost of entry, you get one-quarter the slot machines. In theory.

In theory, I guesstimated that these mini-casinos would earn, all things being equal, about $68 million a year.

Back in the real world, Trump Marina earned $203.6 million in 2008, after a long decline (in 2002, it made $283 million in gaming revenue). It is obviously under-performing, and has the potential to do much better business. It’s near two of the biggest and best-performing properties in the city (Borgata and Harrah’s), much better neighbors than the Atlantic City Hilton near Albany Avenue. It has an existing customer and marketing database and needs no additional infrastructure. At the very least, it’s a turnkey business. Of course, you’d have to invest heavily to bring it up to its potential, but how much would it cost to remodel? It took $150 million to transform the Aladdin into Planet Hollywood. P-Ho is about 2.5 times the size of the Marina.

So instead of starting from scratch and investing $300 million in a new facility with one-quarter of the revenue potential, why not just buy Trump Marina and renovate it–really renovate, almost beyond recognition? Even if you put $100 million into it, you’re still saving money, and you’ve got a much bigger, better-situated Hard Rock casino with way more potential upside.

BTW, in the late 1990s Trump’s Castle was almost re-themed as a Hard Rock casino, but for a few reasons that didn’t happen and we got Trump Marina instead. Maybe that’s why I wanted to run the numbers on this one.

Am I missing something, or when you look at it like this does $300 million for a mini-casino seem like a bad deal to you, too?

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