Trump’s Next Roll Has Atlantic City Competitors Edgy : Gaming: The 43-year-old billionaire will soon control a third of the city’s casino and hotel business.
Looking west on the beach along this city’s fabled Boardwalk, a white casino hotel with a red name at the top commands attention because it stands taller and more stylishly than its competition.
The building is the Trump Plaza and its owner is Donald J. Trump, the 43-year-old billionaire developer from New York City whose casino investments in this New Jersey resort town and gambling mecca are beginning to rival his Manhattan real estate holdings in size, ambition and attention attracted.
With a business style that’s fast-moving, flashy and contentious, Trump has easily become the dominant personality in Atlantic City. An indefatigable promoter, he is about to open the world’s most expensive casino, the Taj Mahal, at the eastern end of the Boardwalk.
“The best way to describe him is as the baby boomers’ Howard Hughes,” says Al Glascow, publisher of the casino industry newsletter Atlantic City Action and a consultant to Trump.
Both disliked and admired, Trump moves about town like a modern maharajah. He shuttles in and out by private helicopter and moors his $29-million yacht, the Trump Princess, in a marina near his second casino here, Trump Castle.
In a recent interview aboard his yacht while it was docked in Manhattan, Trump reiterated his intention to buy or build a major casino in Nevada, probably within 24 months. Earlier this year, he hired Michael D. Rumbolz, a lawyer and former Nevada casino regulator, to investigate what casino properties are for sale.
Trump is believed to be interested in buying the Mirage in Las Vegas, a luxurious casino complex built by Golden Nugget Inc. next to Caesars Palace and scheduled to open later this month.
“I want to go in on my own terms,” Trump said when asked about his interest in the Mirage. “I want to buy a first-class property.”
Since the early 1980s, Trump has spearheaded investments approaching $2 billion in casino and hotel properties in Atlantic City, where gambling was legalized 11 years ago as a way of revitalizing an economically depressed area.
By one measure, Atlantic City is the nation’s most popular tourist attraction, with more than 33 million visitors last year, many of whom came by bus from nearby urban areas for a day of gambling and returned home at night. The benches along the Boardwalk are filled with elderly arrivals watching the human traffic go by.
But the casinos amount to a strip of well-being against a backdrop of poverty, decay and racial division. Charges of racism and municipal ineptness have poisoned relations between the casino industry and City Hall.
Trump needs a major expansion of the local airport before he can use his fleet of commercial airplanes to ferry gamblers into town. The small airport terminal now can handle only limited commercial traffic.
“I’m going to have to get more involved,” Trump said, sounding like a de facto mayor. “The city has been horribly and corruptly managed. They have the money, but not the know-how to spend it.”
Mayor James L. Usry, arrested last summer on charges of bribery and corruption, refused to be interviewed for this article, citing negative publicity that he and the city have received in recent months.
Trump is disliked by some in town who feel that his business practices are ruthless and anti-competitive. “He is a very wealthy bully,” said one casino executive, who asked not to be identified because his firm is suing Trump.
Others, though, say the ill feelings spring from envy as well. “He is a tough operator and he has been very successful,” said another casino official.
Trump’s success in Atlantic City is part of a growing chasm between the haves and have-nots among the 11 casinos. Several casinos are in trouble financially, and one, Resorts International, has defaulted on long-term debts.
Although Trump owns two money-making casinos, it is the Taj that is causing anxious anticipation.
Competitors worry that the Taj will disrupt and cut into their business at a time casino revenue growth has slowed sharply, but Trump officials say that the entire city will benefit because the new casino will bring more big spenders to town and improve convention business.
“The industry is very concerned about the Taj,” said Carl Zeitz, a former New Jersey casino regulator who is now an industry consultant. “It is clearly going to be the facility.”
The Taj will be equal parts hotel, convention center and casino, and will surely rank as the gaudiest facility ever built along the Boardwalk.
The cost of the casino hotel--an unabashedly opulent complex that will have chandeliers worth more than $10 million--should slightly exceed $1 billion by the time it opens next April. Trump financed most of it by selling high-yield junk bonds.
Trump’s plans for the Taj, though, were dealt a severe blow when his two top casino executives, Stephen F. Hyde and Mark Grossinger Etess, were killed in a helicopter crash in southern New Jersey on Oct 10.
Hyde, 43, ran all of Trump’s casino operations in Atlantic City. Etess, 38, had been chosen to manage the Taj. A fourth-generation hotelier, Etess was a member of the family that founded the famed Grossinger’s resort in the New York’s Catskill Mountains. Walter J. Haybert, 47, another Taj senior executive, has been named to take the manager’s job.
In an interview shortly before his death, Etess predicted that the Taj would be so successful that it would shift the balance of financial power on the Boardwalk from west to east. The Taj should generate about $400 million annually in gambling winnings, Glasgow said, an amount that would easily make it the most successful casino in town.
The Taj is also expected to create more than 6,000 new jobs in a market that already has an acute labor shortage, and this raises the fear at other casinos that they will lose valued workers whom it will take months to replace.
Of course, the Taj’s business may well come partially at the expense of Trump Castle and Trump Plaza, which together generated casino revenues of nearly $550 million last year. “I think he will cannibalize his own market,” said Peter G. Boynton, who runs Caesars Palace in Atlantic City. “He may end up hurting himself more than he thinks.”
Trump’s moves are being watched closely in Trenton, the capital, where New Jersey casino regulators view his expanding influence with some misgivings. Once his present expansion plans for the Taj and other properties are complete, Trump will control a third of the city’s casino and hotel business, according to figures from the New Jersey Division of Gaming Enforcement.
A breakdown of those figures shows that Trump will soon own 36% of the hotel rooms, 36% of the parking spaces and 46% of the hotel convention space, while accounting for 32% of the industry’s revenues.
“It could be a potentially threatening situation,” said gaming division director Anthony J. Parrillo. “It’s very important that Atlantic City have a healthy mix of competition.”
Casino laws in New Jersey limit single ownership to three casinos, so Trump cannot open another after the Taj. But he has scooped up other distressed properties in recent months, including the Atlantis casino hotel, which had been operating in bankruptcy court.
Trump bought the Atlantis from Elsinore Corp. for $63 million and operates the hotel--minus the casino--primarily as a place to stash guests when Trump Plaza is filled. The city has a shortage of first-class hotel accommodations, especially on weekends.
Further, in a surprise move last March, Trump bought some vacant buildings next to Trump Plaza where Penthouse International, the magazine publisher, had tried to build a casino and hotel. Penthouse had abandoned the project years ago.
Trump bought the properties for $52 million, snapping them up from under the noses of Pratt Hotel Corp. in a deal signed in secret early one Sunday morning. Trump wants to use the site for a hotel and parking area.
Trump has built his empire in Atlantic City through major business deals that have showcased his ability to act quickly and opportunistically.
He began by building Trump Plaza in the heart of the Boardwalk. At one time, Holiday Corp. owned 50% of the hotel, but Trump later bought out that interest.
In 1985, Trump bought what is now known as the Trump Castle, situated on an inland marina a couple of miles from the Boardwalk, for more than $300 million. Trump quickly stepped in at the 11th hour and took over the unopened property after state regulators unexpectedly denied the Hilton Hotel chain a casino license because of its association with a reputedly mob-connected lawyer.
Trump assumed sole ownership of the Taj last year after a protracted and widely watched takeover battle with Hollywood producer Merv Griffin over Resorts International, in which Trump had acquired a controlling interest in 1987.
Resorts International’s major assets in New Jersey included its casino on the Boardwalk and the Taj, then half finished and plagued by cost overruns. After Griffin thwarted Trump’s bid to take Resorts private, the two men agreed to divvy up the casino company, with Trump paying $273 million for the Taj, about half the amount Resorts had invested in it at the time.
Trump’s business deals affecting Atlantic City are usually engender lots of public attention and hubbub. For example, he stirred up a tempest by investing heavily in the publicly traded stocks of other gaming companies in town.
Holiday Corp., which owns Harrah’s, initiated a financial reorganization in 1986 after Trump bought a large stake in the firm, while Bally Manufacturing bought back Trump’s stake above market value, a practice known as greenmail, to ward off a hostile takeover. Both deals yielded fat profits for Trump.
Trump also bought more than 2% of Caesars World with an eye toward taking control of it, before unloading the shares at a $3.3-million profit. Later, under pressure from regulators, Trump agreed to curb in his investments in competing companies without the approval of the New Jersey Casino Control Commission.
Probably no one is more angry at Trump these days than executives of Dallas-based Pratt Hotel Corp., which had planned to buy the Penthouse property before Trump stepped in. Pratt, which owns the Sands casino in Atlantic City, has challenged the sale in court.
The conflict began in 1987 when Pratt agreed to buy the Penthouse property, next door to Trump Plaza, for $40 million, court records show. The vacant site had been abandoned for years, and at one point the city threatened to tear down the unsightly buildings that front the Boardwalk.
Trump wanted the property himself for a large, non-casino hotel that would serve as an annex to the Trump Plaza and, according to court records, he used litigation and verbal threats to delay the sale beyond its deadline. Pratt had planned to build a $260-million entertainment facility to be known as the Sands-Hollywood casino hotel.
Trump reportedly warned William Weidner, Pratt’s president, that he would keep the Sands-Hollywood “tied up” in court for years rather than allow a new casino to be built next to the Trump Plaza, court records show.
At one point in the summer of 1988, Trump drew a rebuke from the city for his supposed attempt to “thwart the entry” of Sands-Hollywood “into the Atlantic City marketplace,” court papers show.
Pratt had an option to buy the property, pending the necessary government approvals. When the option expired last December, it was extended to February. When the deal still had not gone through in March, Penthouse sold the properties to Trump for $52 million.
Voluminous lawsuits and countersuits followed in Atlantic County Superior Court, with Pratt Hotel Chairman Jack E. Pratt vowing to “sue Trump like he’s never been sued before,” according to an account in the Philadelphia Inquirer.
The dispute is scheduled to go to trial next January, but that doesn’t seem to phase Trump. He dismissed Pratt’s litigation with a barnyard expletive, adding: “They had an option to buy the property and the option expired.”
