Author: William Sokolic

In 2008, Penn National Gaming offered Atlantic City $800 million to develop a casino at historic, long-vacant Bader Field, one of the nation’s earliest municipal airports, closed since 2006. The company planned to partition the 140 acres so other gaming companies could be part of the package. But the state came in and nixed any deal unless it went out for a public bid.

What would have happened had Penn National carried out the plan? Would it have built its own casino resort, even if there were no other companies in the mix? In 2008, the year a good many AC development deals went south, would the tanking economy have sunk any and all plans?

The economy improved, then soured again in the wake of the Covid-19 pandemic. Now, arguably, it’s back on the mend.

But Bader Field remains much as it was in 2008: empty. Pop-up festivals, musical and otherwise, have taken place there, as well as concerts. Development proposals have come and gone.

The latest comes from DEEM Enterprises, with a multi-functional residential project revolves around… cars. The literal centerpiece of the company’s proposed plan will consist of a Formula 1-style driving course.

“Our project is far different than anyone else’s,” said Michael Binder, the M in DEEM.

The project, known as Renaissance at Bader Field, is an imaginative one, for sure. If it comes to fruition, it will create jobs and tax revenue at a site that has been fallow for 15 years. There will be 423 condo units encircling the track, and another 372 apartments and 34 townhomes along Albany Avenue, many for rent. Plans down the road call for a couple of high-rise condos and eventually a brand-name hotel. There will also be 340,000 square feet of auto-centric and other retailers. Shops and restaurants will line Albany Avenue, some with housing on top.

The proposal also includes a museum and event center, an educational component and a waterfront amphitheater. “We anticipate having an array of different events focused on all things automotive, the latest sustainability technologies, documentary film making, talks, small concerts, guest appearances, and general interest,” Binder said. “These elements will coincide with the overall buildout of the site.”

These are lofty proposals. But Atlantic City is littered with lofty proposals that never left the drawing board. What makes this one different?

“I looked at the site five or six years ago,” Binder said. “I knew what it could be. The opportunity to change Atlantic City is right in front of us.”

The two E’s in DEEM, Erick Feitshans and Eric Harryman, are involved in the entertainment industry in Los Angeles. The D is for Daniel Gallagher, a local lawyer.

The cost for Renaissance would come to $2.7 billion, and DEEM has the money in hand, Binder said, including “$50 million of our own money involved.”

The development would be phased in according to demand for the housing. Purchase prices would also be based on demand. The plan sets aside 20 percent of the project along Albany Avenue for affordable housing; the variety of housing sizes and mix of market-rate and affordable rentals would boost options in the Chelsea Heights neighborhood, Binder said.

The plans haven’t left gambling behind, and DEEM has a couple of ideas on that front. One has to do with creation of a mobile sportsbook at some point. “According to our gaming consultant you do not have to be on a particular casino property in order to have a sportsbook license. The ‘special license’ is called a skin which can be purchased directly from a casino. The question I’ve just asked is can more than one skin be purchased to include all casinos in Atlantic City.”

The New Jersey Division of Gaming Enforcement confirmed that any online sports wagering entity can partner with a casino or racetrack for a skin. “But each casino and racetrack are limited to three skins total,” said Christopher Glaum, chief of investigations for the DGE.

Developers also hope to get into what many call the next big thing in gambling: esports. That could be an avenue to sports betting, too.

“Competitions that are approved for wagering can occur anywhere, provided they are approved by the division,” said DGE spokesman Leland Moore. “In-person wagering may only occur at approved casinos or racetracks, though mobile wagering can take place anywhere inside the state.”

Then there’s the 2.44-mile track. It may look like a racecourse, but it isn’t, Binder said. Residents and guests who love cars could get behind the wheel on the track. If this whole auto/residential mix seems a little odd, you haven’t heard of the Thermal Club (left) in Thermal, California. It has many of the same features planned by DEEM, including the racecourse.

“The paramount concern of the motor sport development will be safety,” Binder said. “The course will be used by highly trained residents who will have to pass rigorous safety requirements before driving the course. Additionally, the membership will be limited to individuals who are not merely auto enthusiasts but motorsport lifestyle participants. We will have availability for guests to participate but they must go through the same safety protocols.”

Binder said noise from the track would not be a problem given the design of the Renaissance at Bader Field, which would be bordered by condominiums with sound-absorbing building envelopes. Don’t forget the multi-layered landscape design beyond the condos. And the housing along Albany Avenue.

Seeing Renaissance at Bader Field go from drawing board to reality will take more than money. DEEM has to jump through several hoops to get the approvals it needs. The city and Mayor Marty Small Sr. seem to be on board, though Small’s office did not respond to a request for comment. But that’s only one part of the permit puzzle.

• The Casino Reinvestment Development Authority (CRDA) has to approve the plan, as Bader Field is located in Atlantic City’s Tourism District. That includes the site plan, subdivision and variances, spokeswoman Karen Martin said.

• The state Department of Community Affairs (DCA) must also pass judgement on any proposal for the site. “The DCA has oversight and reviews all contracts, meeting minutes, resolutions and ordinances that the city may approve,” Martin said.

• The state Department of Environmental Protection (DEP) has to issue a Coastal Area Facilities Review Act permit, among others, especially since the project involves much-needed dredging of nearby channels and depositing the spoils on the site to build it up as a buffer against storms. For more than six months, the DEP has had monthly discussions with Atlantic City officials and the CRDA regarding potential use of the site as an upland confined disposal facility for material dredged from Gardner’s Basin. “The material would serve as a cap to remediate low levels of contamination and raise the level of the site for redevelopment,” DEP spokesman Larry Hajna said.

The channels are “clogged with silt and impassable in many areas,” Binder said. That sludge would be mixed with debris and gravel for a sublayer. Binder expects 2.5 million cubic yards of sludge to be dredged up for the project.

For all the obstacles, Binder believes the needed approvals will come, and the city’s largest tract of vacant, prime real estate will be OK’d for development. But until DEEM has formal site control of Bader Field, the company will not make any submissions to the CRDA for use approvals.

“We’re confident they will see the merits of the project and the massive benefits to the city, county, and state,” the developer said. “It takes political will and a full understanding of the positive impact of this project on Atlantic City and coastal development in general.”

Little Caesars Arena in downtown Detroit is home turf for the Detroit Red Wings. The team and the arena are owned by the Ilitch family, and the venue name wasn’t plucked out of the air. The Ilitches also own Little Caesars Pizza as well as the Detroit Tigers and the MotorCity Casino Hotel, Motown’s only locally operated casino.

Clearly, the Ilitch name is a big deal in Detroit City. Now the clan is making noise 650 miles away, in Atlantic City.

In April, with little fanfare, Ilitch Holdings inked a deal to acquire as much as a 50 percent stake in Ocean Casino Resort from Luxor Capital Group, a New York hedge fund.

“We are extremely excited about the proposed investment by the Ilitch organization, which, if approved, will give Ocean access to growth capital and provide a strategic partner to Luxor. We look forward to continuing to grow Ocean in partnership with the Ilitch organization for years to come.” Luxor said in a prepared statement.

Ilitch Holdings declined comment on the acquisition until regulatory approvals are secured. But in a statement, the company recognized “the success that the team at Ocean has achieved over the past two years and looks forward to building on their accomplishments through continued investment in both the property and the customer experience.”

The Detroit Model

So, what attracted Ilitch Holdings to Atlantic City, and to Ocean?

The complete answer remains to be seen, but the Boardwalk property makes sense for a number of reasons. Originally named Revel and borne in the crunch of the Great Recession, the property opened, closed, continued to falter under previous owners, and is owned by a hedge fund instead of a casino operator. The property has room to expand, and not just within its existing footprint. The gleaming silver tower, the last resort property on the Boardwalk’s north end, Ocean lies adjacent to plenty of undeveloped and underdeveloped land.

Therein lies a comparison to Detroit. Both Little Caesars Arena and MotorCity were surrounded by distressed properties, available on the cheap for redevelopment.

However, “It’s important to keep in mind that community redevelopment is not the core mission of Ilitch Holdings,” said Joseph G. Eisenhauer, dean of the College of Business Administration at University of Detroit Mercy. “To the extent that adjacent properties are improved, their business expands and everyone wins.

“But aggressive revitalization of all the neighborhoods where they conduct business may be expecting too much, even from one of the largest private enterprises in the city.”

That said, in the past seven or eight years, since it emerged from the largest municipal bankruptcy in American history, Detroit has become a much more desirable city, both for residents and tourists, Eisenhauer said. A once-desolate downtown is packed with pedestrians, and cranes still punctuate the skyline. More than $24 billion has been invested in commercial, retail and residential projects since 2006.

“The Ilitches have played a role in this comeback, though the contributions of the automakers, (Quicken Loans) Dan Gilbert’s companies and others have been larger,” Eisenhauer said. “The ‘walkable neighborhoods’ idea has been touted more by the mayor than anyone else, so I would look to the public sector rather than the private sector to evaluate progress on that front.”

For the past 12 months, cities like Detroit and Atlantic City have operated under the cloud of the coronavirus and its impact on economic well-being. Which brings us back to the original question: Why Ocean for the Ilitches?

“It’s obvious Ocean paid attention to the demographics,” said Robert Ambrose, a former casino executive, consultant and adjunct professor of hospitality/casino management at Philadelphia’s Drexel University. “They identified the right niche marketing areas and took time to understand the competition. The end result was the selection of the correct hospitality products and amenities, while deploying strategic marketing initiatives to tie it all together.”

Above all, Ambrose said, Ocean is a survivor and a testament to creativity. “It’s withstood both the hurricanes of nature and the storms of commercial failure (as Revel) to find its place within the top tier among the resort hotel casino experiences in Atlantic City.”

Remarkably, Ocean was the only one of nine casino hotels in Atlantic City to report an increase in gross operating profit in 2020. What’s more, for the nine months leading up to the coronavirus pandemic closures in March 2020, Ocean posted double-digit year-over-year growth.

According to Ambrose, whoever took over the expensive but flawed Revel after its quick closure needed deep industry experience, ready capital and a commitment to move the property forward. “I walked the dark and musty halls when it was closed under the Revel name with one of its past owners. I’ve literally seen the property’s bones first-hand, front and back, and they’re solid. It just needed the right mix of investment and leadership.”

As Ocean, the property has completed several unfinished hotel floors, added branded amenities and made productive use of underutilized or misconfigured space, he added.

“There is a certain feel when you walk through a property. You either get the experience presented to you or you don’t.” He says Ocean made it happen.

Will Luxor Sell Out?

Luxor Capital purchased the $2.4 billion property at rock-bottom price, likely around $250 million, when the prior owner couldn’t pay the debt service. The hedge fund put $70 million into the property and started to rebrand it, said Michael Busler, professor of Finance at New Jersey’s Stockton University. But Luxor wasn’t in the business of running a hotel casino.

Even so, “They had an operating profit because they were able to charge the highest prices in Atlantic City for rooms, and they operated very business-like to keep costs down.”

The success of the past 12 months speaks to Luxor’s decision to part with as much as half of its stake.

“The value of an income-producing property is based on the amount of income earned,” said Busler. “Even during a pandemic, Ocean was able to generate a $27 million profit. That likely means the increased value of the property results in selling half of the ownership and return all of their original capital investment. That’s how hedge funds work.”

And Ocean could easily reach business levels of the larger casinos in town, Busler said.

“In general, assuming the virus is contained and the Jersey shore weather is good, I think the South Jersey resort economy is in for a boom year,” he said. “Most businesses will see record-setting sales, likely 8 percent to 10 percent higher than 2019, the last normal year. Ocean will probably see rapid growth numbers putting it in the middle of the pack.”

These dynamics were not lost on Ilitch Holdings. “They saw Ocean Casino Resort as an opportunity to leverage their expertise in casino and hotel management,” Busler said. “If I’m right and Ocean’s profit doubles or triples or more, that increases the value of the property by two or three times, allowing Ilitch to reap phenomenal return on their investment.”

Indeed, the time seems perfect for a seasoned company such as Ilitch Holdings to bring its diverse entertainment and gaming industry experience and huge customer database and incorporate it with the Ocean brand, Ambrose said.

Unlike Luxor, Ilitch comes to the table as a seasoned casino operator, with a portfolio of food and beverage companies and franchises in sports and entertainment. “The ability for the Ilitch enterprise to promote their brands and cross-market casino loyalty options to their guests will only increase the customer data base and the potential of growth for Ocean Casino Resort,” Ambrose said.

Buying a stake in a resort in Atlantic City makes sense from a business perspective for Ilitch, said Eisenhauer: it diversifies its portfolio while leveraging its expertise in casino and hotel management.

“Clearly, it wouldn’t make sense for them to operate a competing casino near the MotorCity Casino, so Ocean Casino Resort gives them an opportunity for expansion that doesn’t exist in Detroit. I wouldn’t expect them to follow a different approach in an out-of-town investment than they follow in their home town.”

Ocean also has plenty of room to grow. The original Revel design called for two equal hotel towers, but only one was built, due to the recession. And don’t discount those blocks of adjacent, vacant land, much of it smack on the oceanfront.

“If the economy picks up,” said Busler, “there are some great investment opportunities. As they operate the casino, they’ll keep their eye on development and any land bargains that always pop up in Atlantic City.”

But another question remains: Why would an experienced casino and entertainment company invest in Ocean without a controlling interest”

“It is unlikely Ilitch Holdings would be satisfied to be what amounts to a silent partner. It seems reasonable to assume the company will increase its stake to hold a majority interest,” Eisenhauer said.

This is pure speculation, but speculation that makes sense, agrees Busler. “I suspect that in a few years,” he said, “they’ll buy the other half of Ocean.”

Baseball failed. Basketball failed. Football failed. Hockey failed. Atlantic City hasn’t had a good track record with sports.

Could Formula 1 racing be the exception?

Deem Enterprises wants to find out. The company has floated a $2.7 billion proposal for a mixed-use development at Bader Field, the long-vacant former municipal airport, with a 2.44-mile race course as the centerpiece. The project would also include with bayfront townhouses, condos and affordable housing, plus other amenities.

Atlantic City attorney Daniel Gallagher presented the $2.7 billion proposal to City Council, which passed a resolution on March 24 to vet the project.

“The proposal is exciting, because it represents the largest potential investment in Atlantic City in almost 10 years, since Revel,” said Jane F. Bokunewicz, of the Lloyd D. Levenson Institute of Gaming, Hospitality & Tourism at Stockton University. “This indicates that investors are optimistic about the future of the resort. But whether Formula 1 auto racing is the best use of the space is debatable.”

If approved, the project could bring fresh development to an asset that’s failed to find its footing. Bader Field’s size—150 acres—and location—right outside downtown Atlantic City—seems a natural for a large-scale tourist attraction. In March, prior to the implosion of Trump Plaza on the Boardwalk, city officials recommended that gawkers park at Bader Field, in order to get the best view.

“Any proposal is welcome,” said Robert Ambrose, consultant, adjunct professor of hospitality management and former casino executive. But a feasibility study will have to show its value to the market place and to the local community, he said.

“Auto racing is not enough. Can the space lend itself to any wintertime activities? Can the location be a four-season location? What other mixed-use offerings are being considered to complement the car races?” Ambrose said he could envision hotels or extended-stay lodging at the city’s gateway, which offers great views of the bayfront. The hotel rooms could help Atlantic City be more competitive in the convention market.

Bokunewicz said City Council must ask the same questions: What kind of demand is there for this entertainment? How many permanent year-round jobs would result? What taxes will be paid? Will the space be flexible enough to attract festivals and concerts, as in the past?

On paper, the plan sounds good. Deem Enterprises promises to be the first development in the state to be carbon net-zero. Another part of the project would include a center to train city residents to be auto mechanics.

Gallagher told the Press of Atlantic City he has letters of intent for financing, and said the city could sell Deem the land or provide the tract in exchange for income-sharing.

Any plans to sell the property—for which the term “airport” (l.) was first coined—require state approval. Bader Field opened in 1910, and according to local lore, in 1931 hosted legendary aviators Eddie Rickenbacker, Charles Lindbergh and Amelia Earhart, who came to celebrate the launch of Eastern Airlines. During World War II, a minor league baseball stadium was built on the grounds, and in 1944, the New York Yankees held spring training there, and even played several games.

“Something this big … all nine council members need to be involved in this,” said Council President George Tibbitt. “When you have this kind of money on the table, we have to at least have it properly vetted by the governor’s office and the Senate president.”

Another question is the residential component.

“Bader Field lends itself to more of a transient tourist location and not a residential footprint,” Ambrose said. “I’m not sure how any type of proposed housing model would work alongside of such an entertainment/racing model. Crowd control and noise are certainly factors for residents.” The course would rely on soundproofing materials for noise abatement, according to Gallagher.

Another concern is competition from the New Jersey Motorsports Park in Millville, Cumberland County, less than an hour’s drive from Atlantic City. That track hosts minor NASCAR races and other racing events.

“The racing industry market is not large enough to support racetracks so close to one another,” said Brad Scott, president and COO of the Millville track. “Several racetracks in New Jersey have closed or are about to close.”

An auto racing proposal was not the first for the region.

“My recollection is that there were discussions about developing a NASCAR track in Hamilton Township in the vicinity of the former Atlantic City Race Track. They did not come to fruition,” said Atlantic County Planning Director John Peterson.

While a track failed to materialize in the county, one element present now that was not available then—or for the sports teams that failed—is sports betting.

“That does make this option more viable today,” Ambrose said. “Hosting races at Bader Field is a great Atlantic City tie-in from a marketing perspective. The casinos could also ride the tail winds with some unique promotional parallels—as well as sports betting.”

The city has been on the lookout for more diverse forms of entertainment, and certainly doesn’t plan for or need more casinos. After the Plaza implosion, AC Mayor Marty Small summed it up by saying, “We’re always going to be a casino town, don’t get that wrong. But it’s time to take a shift to make a difference from every other area near and far that now has casinos.”

Pat Fasano has a vision for Atlantic City. Part of the vision includes people strolling from his night spot, Bourré, on New York Avenue to the Irish Pub on St. James Place with a cup of beer.

Until June 12, it wasn’t possible unless you hid the drink in a brown paper bag. But thanks to a temporary order just issued by Mayor Marty Small, the activity is now perfectly legal on the Boardwalk, around Gardner’s Basin and within the Orange Loop, a developing area off the Boardwalk between St. James Place and New York Avenue, named for the orange properties on the Monopoly game board.

Fasano, a real estate developer, has supported open containers in tourist areas for years. “It gives Atlantic City the atmosphere of New Orleans—bar-hopping, listening to live music, catching a drive-in movie,” he said.

In the wake of the coronavirus pandemic, the order lets people enjoy a summer libation while social distancing between watering holes.

Last December, City Council narrowly approved a resolution urging the state legislature to act on a bill that would permit open alcohol containers in certain areas of the city. But the pandemic got in the way of passing such a law. Governor Phil Murphy’s shutdown of the state made way for the temporary measure.

“We want to help out the people that are in business,” Small told the Press of Atlantic City. “This shows the business community that this administration means business.”

It’s been a long time coming, said Scott Cronick, radio personality with News Talk WOND. “Every time I go to cities including Las Vegas, New Orleans, Memphis and many others, I think, `Why doesn’t Atlantic City allow this?'”

It makes perfect sense for a resort where walking is so easy. “It promotes a party attitude, a laid-back vibe. It encourages jumping from place to place to place, which in turn attracts bachelor and bachelorette parties, convention-goers and those just looking to bar hop,” Cronick said.

Sure, bar-hoppers travel in groups, but everyone in the group goes at their own pace, Fasano said. “You can be at a show at Anchor Rock Club on New York Avenue and then take your drink and catch a show next door at Bourré, and then maybe see a movie at the drive-in theater down the block. New York Avenue is so successful because of its entertainment value, and the stages will be the key driver with this order. Now people will be able to experience more venues while travelling freely with their beverages.”

There’s another side to the story. No stress, as in “no race to finish a drink before you leave a venue,” Fasano said. “We want people to be fluid.”

The gaming industry stands behind the order, said Steve Callender, president of the Casino Association of New Jersey.

“We endorsed the open-container legislation several years ago, and still support it,” he told GGB News. “We want to encourage residents and tourists to come to Atlantic City, and believe this order will attract visitors back to our great city.

“As we work to reinvigorate the local economy, we need all the tools available to help us recover and move forward. We believe creating a positive and festive environment on our iconic Boardwalk is a great start.”

Evan Sanchez, co-founder of Authentic City Partners, has seen the positive impact of open-container laws in cities like New York and Philadelphia.

“We strongly believe that open-container will help to support small businesses and to bring about a sense of revelry that is authentically Atlantic City,” said Sanchez, a millennial whose company is developing properties around the Tennessee Avenue corridor.

Dino Dounoulis, general manager of the Biergarten Atlantic City and neighboring Bungalow Restaurant & Lounge, said open containers could give struggling business owners a lifeline with outdoor dining reopening June 15. “It’s survival mode right now,” he said.

Atlantic County’s three state representatives—Republican state Senator Chris Brown and Democratic Assemblymen Vince Mazzeo and John Armato—are prime sponsors in their respective chambers of legislation that would permanently allow open containers in Atlantic City’s Tourism District. If the temporary order proves successful, city officials believe it will go a long way in convincing lawmakers in Trenton to step up.

The Atlantic City Police Department has also given its support. Deputy Chief James Sarkos said the department worked closely with the city administration to craft the temporary executive order. Beverages must be in a plastic container with the name or logo of the licensed seller. Drinking alcohol in a motor vehicle is not authorized.

“We’re confident we have adequate safeguards in place for this to be a successful addition to the many great things Atlantic City has to offer,” Sarkos said.

The executive order will expire in November, or whenever coronavirus-related restrictions on bars and restaurants are lifted by the governor.