Pinnacle folds its hand in Atlantic City

In yet another blow to Atlantic City's psyche, and perhaps its future, Pinnacle Entertainment Inc. of Las Vegas said yesterday it wants to sell land where it had planned to build a $1.5 billion Boardwalk mega casino as part of the company's efforts to cut costs.

Although there already were warning signs - including Pinnacle's decision to put the project at the old Sands site on indefinite hold more than a year ago, and later referring to the project as simply a "dream," the announcement didn't diminish the sting or bad timing.

The pullout, said Jeffrey Vasser, executive director of the Atlantic City Convention and Visitors Authority, "is symptomatic of the national economy and the credit crunch that many companies have found themselves in over the past 18 months."

Pinnacle's departure comes as Atlantic City continues to struggle against slots parlors in Pennsylvania. Gambling revenue for the city's 11 casinos in 2009 was at it lowest in more than a decade.

In addition, a stingy lending environment has already caused the delay or permanent shelving of three other major casino projects, including ones by Revel Entertainment Group L.L.C. and MGM Mirage.

"This is hardly a surprise, given the tight financial markets, the continual slide in the Atlantic City gaming market, and Pinnacle's increasing focus on its core riverboat properties," said Joseph Weinert, senior vice president of Spectrum Gaming Group L.L.C. in Linwood, N.J., which has done consulting for Pinnacle.

"Since they are not making any more Boardwalk land, the Sands site remains tremendously valuable," he said. "Hopefully, it will attract a buyer who can execute on a visionary development that Atlantic City surely needs at this time."

Pinnacle said it would sell its 19 acres once occupied by the Sands Casino Hotel because it "does not intend to develop its Atlantic City property."

The announcement was part of Pinnacle's 2009 fourth-quarter earnings report, which showed a net loss of $242 million.

Pinnacle said the decision to abandon the Atlantic City project was part of a companywide effort to cut expenses amid a recession that has eroded the bottom lines of most U.S. gambling companies.

In addition to pulling out of the Shore town, Pinnacle is reducing the size and scope of its Sugar Cane Bay project in Lake Charles, La. (which is expected to yield $100 million in cost savings), consolidating three Las Vegas offices into one, and selling the corporate jet.

"We believe these are positive steps that will provide the company with liquidity to weather the continued softness in regional markets," Deutsche Bank AG gaming analyst Andrew Zarnett said in a note to investors yesterday.

Pinnacle, which had eyed the Atlantic City market for years, purchased the land in late 2006 from financier Carl Icahn for $275 million.

It imploded the Sands in October 2007 to make way for its new gambling palace.

Pinnacle wasn't shy in letting the region know it was the newest player in town. It put up at least half a dozen billboards on both sides of the Atlantic City Expressway teasing the arrival of its new casino.

But less than a year later, the company cited deteriorating credit markets as a reason to put the project on "indefinite hold."

Pinnacle had envisioned breaking ground for its Boardwalk location late last year. But as the economy got worse, and pressure from Pennsylvania casinos mounted, Pinnacle became silent on the project.