Claridge And Former Atlantic Club Appeal Casino Deed Restrictions

Barbara Nathan Updated on September 4, 2020
Caesars Atlantic City NJ casino

The widely criticized deed restrictions that Caesars placed on three of its former holdings in Atlantic City–the Showboat Hotel, Claridge Hotel, and the former Atlantic Club–preventing any of them from opening a new casino remain in effect.

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Until now, only the Showboat expressed any strong desire to circumvent the restrictions so it could build a new casino after all. However, now that the Caesars-Eldorado merger is a done deal, four Atlantic City casino properties fall under the direct control of the Caesars corporate umbrella.

This scenario has prompted the owners of the Claridge and the defunct Atlantic Club–TJM Atlantic City, LLC and Colosseo Atlantic City, Inc., respectively–to examine the deed restrictions in a new light.

Should Caesars Entertainment Inc., which now controls four AC casinos, continue to let deed restrictions prevent three other properties from opening casinos?

TJM Atlantic City and Colosseo Atlantic City say it is not fair. If the pending sale of Bally’s to Twin River Worldwide Holdings goes through, then Caesars will control three Atlantic City casinos (Caesars, Harrah’s, and Tropicana) rather than four. However, the sale might not happen.

Caesars would then maintain control of Bally’s but with an added stipulation. On top of the $400 million that the company has agreed to spend on improvements at the other three properties, it must invest another $125 on improvements at Bally’s.

Allowing Caesars to control four of Atlantic City’s nine casinos could give it too much of a stronghold over the Atlantic City casino industry, especially if the existing deed restriction stands. This would stifle desirable competition. TJM and Colosseo at least want to have the option to consider opening a casino on the premises if they would like to go that route.

Where the Division of Gaming Enforcement and Casino Control Commission stand on the deed restrictions matter

At the July 15-17 meeting of the Casino Control Commission to decide whether or not to approve the Caesars-Eldorado merger, the Division of Gaming Enforcement (DGE) recommended that final approval be contingent on 40 conditions.

One of them mentioned lifting the existing deed restrictions that Caesars had placed on the three Atlantic City properties it sold.

Caesars executives agreed to remove the deed restrictions, But surprisingly, the Casino Control Commission, which had the final vote, did not. It was the only one of the DGE’s recommendations that the Commission ultimately rejected.

Why did the Commission choose not to lift the existing deed restrictions?

Perhaps the Commission didn’t want to rock the boat out of deference to Atlantic City’s two newest casino properties, Hard Rock Atlantic City and Ocean Casino Resort, which did not want the deed restrictions lifted. Presumably that was why they filed a petition to be allowed to testify at the July 15-17. hearing.

The Showboat is located between Hard Rock and Ocean and within walking distance of both. And it had already indicated that it wished to open a casino on an adjoining lot.

So clearly, its two immediate neighbors did not relish the thought of a casino next door to them reopening and siphoning business away from them. Although their petition was denied, the owners must have been very happy that the Commission decided to leave the deed restrictions intact after all.

The reasons the Commission gave for not incorporating eliminating the deed restrictions into the final agreement did not specifically mention Hard Rock, Ocean, or any other properties.

Instead, the Commission said that lifting the deed restrictions “would greatly complicate” the purpose of the meeting, simply to rule on the merger. The Commission also recommended additional discussions including all stakeholders as to whether or not the restrictions should be lifted and, if so, at what time.

It also mentioned the devastating impact that the coronavirus has had on the Atlantic City casino industry. Under those circumstances, compounded by uncertainty about the future,  the Commission couldn’t imagine much interest in opening a new casino now even without the added obstacle of the deed restrictions.

Incensed by the Commission’s decision, the Claridge and former Atlantic Club owners have recently filed an appeal

According to an August 31, 2020 article on ThePressofAtlanticCity.com, TJM Atlantic City, LLC and Colosseo Atlantic City Inc. have now filed a joint appeal protesting the Commission’s refusal to remove the deed restrictions on their properties. The appellants allege that the Casino Control Commission acted “arbitrarily, capriciously, and unreasonably” when it ignored the DGE’s recommendation only to agree to the merger if the ban on casino gambling at their properties and the Showboat was lifted.

The Showboat could have included itself in the appeal but didn’t

Interestingly, the Showboat, the only one of the three Atlantic City properties affected by the deed restrictions whose current owner has to this point expressed any interest in reopening a casino, did not join the appeal.

The Showboat opened in Atlantic City as a casino hotel back in 1987. Then, in 1998, Harrah’s Entertainment (now Caesars Entertainment) purchased it. The property continued to operate as a casino hotel until August 31, 2014 when, despite showing a profit, Caesars decided to close it.

Caesars then sold the Showboat to Stockton University, but after Stockton’s plans for the property fell through, it sold the Showboat to Bart Blatstein in 2016. On July 8, 2016, Blatstein reopened the Showboat as a stand-alone hotel without a casino, which it continues to be.

Initially, Blatstein expressed no interest in reopening a casino on his property. But in 2018, he changed his mind. He planned to build a casino on an adjoining lot he also owned rather than inside the Showboat itself. Legally, as long as he applied for and obtained a license, he could proceed. The land on which the casino would be built is separate from the Showboat so the deed restriction wouldn’t apply.

In 2019, Blatstein received permission from NJ gaming regulators to apply for a license. However, recently, he has switched his focus instead to creating an indoor water park.

Summary and conclusion

If Blatstein changes his mind again and makes opening a casino a priority, with or without a deed restriction in place, he could proceed with his stated plan to build the casino on the land he owns next to the Showboat. So it is understandable that he opted out of filing an appeal.

Meanwhile, unless the ban is lifted, the other two affected properties have their hands tied. On the other hand, neither of them has expressed any actual desire to open a casino, let alone any concrete plans for one. In my opinion, that weakens their case.

Aside from Blatstein, no one else, to my knowledge, has come forward lately with a viable plan for opening a 10th casino in Atlantic City.

Here at NJ Online Casino, as always, we will continue to update you on this interesting developing story.

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