New Jersey gambling regulators approved a new investment partner of Atlantic City’s Ocean Casino Resort on Thursday.
The state Casino Control Commission granted interim casino authorization — a preliminary step toward full casino licensure — to a subsidiary of Ilitch Holdings. Michigan-based Ilitch owns MotorCity Casino, the Detroit Tigers, the Detroit Red Wings, and the Little Caesars pizza chain.
Ilitch will pay up to $175 million for an indirect ownership interest of as much as 50% in Ocean Casino Resort. Luxor Capital Group, a New York-based hedge fund and Ocean’s current owner, will share day-to-day operational control of the Boardwalk casino hotel with Ilitch’s holding company, OCR Investments, LLC.
William Murtha, a former AC casino executive, will serve as trustee until state regulators complete a financial investigation and a full casino license is granted.
Ocean Casino Resort went from worst to top tier in Atlantic City
The successful turnaround of Ocean attracted the new casino operator to Atlantic City, according to testimony from the NJCCC hearing.
In less than two years, Ocean went from a property teetering on the verge of collapse to one of Atlantic City’s best-performing casinos.
Between Ocean’s opening in June 2018 and January 2019, the casino reported more than $23 million in operating losses. In February 2019, Ocean was last among AC’s nine casinos in reported land-based gambling revenue.
Luxor assumed majority control of the property that same month.
One year later, Ocean was sixth in reported land-based revenue. By February 2021, Ocean was third in the market behind only Borgata and Hard Rock.
Through the first six months of 2021, Ocean reported $24.9 million in gross operating profits. In 2019, the casino hotel posted $12.75 million in losses over the same period.
New CEO of Ocean to be determined
However, state regulators expressed some concern over the recent resignation of Ocean’s former CEO, Terry Glebocki.
Luxor brought in Glebocki and others with AC market experience when they took control of Ocean.
Over the course of two days’ worth of testimony, it became apparent that Glebocki’s departure was unexpected. Neither Luxor nor Ilitch executives were able to articulate a detailed succession plan for property leadership.
As a condition of ICA approval, regulators said a CEO or comparable executive must be quickly appointed. Other conditions, such as continued strict financial accountability, were also put in place.
“Given that Ocean’s positive performance is still recent and in light of its recent corporate restructuring and the recent departure of its CEO, it is important for regulators to remain diligent in their oversight during OCR’s interim casino authorization period,” said NJCCC Chairman James Plousis.
More hotel rooms coming to Ocean
Luxor Capital had no prior experience operating a casino before taking over Ocean. Company executives told NJ regulators that nearly $250 million has been invested in the property since 2019.
“We are excited to welcome the Ilitch organization to Atlantic City,” Luxor said in a statement. “Their investment gives Ocean access to growth capital and provides a strategic partner to Luxor. Over the last year, Ocean’s team has progressed under new leadership that features top executives in the gaming and hospitality industries. Since that time, Ocean has strengthened its position in the market and continues to gain market share. We look forward to moving the business forward with Ilitich’s partnership.”
A significant portion of the Ilitch investment will pay down debt to Luxor.
But, several witnesses also testified that a long-awaited capital improvement project will also be a priority.
More than $70 million will be spent to complete 12 unfinished floors of hotel rooms at Ocean. In total, the project will add 464 more rooms, including nearly 100 new suites on three floors.
“Over the last year, Ocean has worked to strengthen its position in the market,” said Bill Callahan, executive vice president of hospitality & gaming for Ocean. “We are excited to advance Ocean’s achievements. The ability to meet growing demand in our hotel experience will create new energy throughout the resort – from our casino floor and award-winning restaurants to our renowned nightlife and entertainment venues.”
AP Photo/Wayne Parry