It is the Game of Patience Carl Icahn Plays and he plays it wellBy May 4, 2013 at 11:55 pmJust when it seemed that the Atlantic City casino industry was being reengineered from the bottom up Carl Icahn has called a time out. Buying casinos in Atlantic City at bargain basement prices has been a trend lately; for 20, 30 or 40 million dollars anyone can now own a casino on the Boardwalk. At those prices, one just might make a profit, or so the buyers appear to have been thinking. After all, even if the casino only made a little money, one could market the hotel aggressively and make the deal pencil out with hotel revenues.However, some of the recent buyers in Atlantic City have made significant capitals improvements after buying at a fire sale price. The Landry Corporation operated Golden Nugget purchased Trump Marina for $38 million. It then invested an additional $150 million totally redesigning and re-theming the property; Landry created a Golden Nugget with no traces of Trump visible anywhere in the new property. Dennis Gomes used another strategy with Resorts. Gomes and his partners purchased Resorts $35 million in 2010, they made cosmetic changes, but did not invest much additional capital in the property. Dennis had a marketing plan rather than a capital plan for making the property successful, but he died without ever reaching his goal. Mohegan Sun is now managing Resorts; it may make significant capital investments in the property in the future, but it hasn’t yet.There are two properties currently on the auction block in in Atlantic City, Trump Plaza and the Atlantic Club. Both were slated to sell for even lower prices than the Marina or Resorts; they might or might not be candidates for major upgrades depending on the strategies of the buyers. The Atlantic Club, formerly the Atlantic City Hilton, was recently the subject of an offer by PokerStars for undisclosed sum, thought to be less than $50 million. PokerStars wants to be on the ground floor for internet gaming in the United States and is hoping to use Atlantic City as a beach head. It wants, and needs, to impress regulators around the country and to create a bricks and mortar reality to compliment its internet presence. Therefore, the Atlantic Club would most likely be made into a showcase; and as PokerStars paid $700 million last year to appease the feds, money is not likely to be an object. More over, it may take a very grand plan indeed to impress the regulators enough to grant PokerStars a license.The other potential sale, Trump Plaza was never likely to produce the same enthusiasm or investment; Meruelo Group is the prospective buyer; it is a development company from California. Meruelo owns one casino, the Grand Sierra in Reno; it does not appear to have the cash flow or the vision of PokerStars. The Grand Sierra was originally built in 1978 as the MGM Grand, later it became Bally, Hilton and finally the Grand Sierra Resort in 2006. If Grand Sierra is any indication, the plan for the Plaza was to make minor changes. Meruelo paid $42 million for the Grand Sierra in 2011 and since then has made $25 million in upgrades; and while that may sound like a sizable amount of money, it is not enough for any significant changes or additions. In Atlantic City $25 million would replace some of the carpet, buy some new mattresses for the hotel and repaint the walls, but not much else.However, neither the grand plan or fixer-upper plan may take place; PokerStars has run up against the opposition of the American Gaming Association and others who do not believe a company that once violated American laws should be granted a license. On May 1st, the chief financial officer of the Atlantic Club recently announced the deal has been terminated, without elaborating on the reasons. PokerStars says they still want to make the deal and it may have a chance. Except for the American Gaming Association, everyone else from the governor to the individual regulators in New Jersey wants to see new investors and renewed energy in Atlantic City.Meruelo has much less of a chance, it has run up against a stone wall by the name of Carl Icahn. Ichan owns the debt and is unwillingly to let the property go at the $20 million price management and Meruelo had agreed upon. Nothing is ever simple in the casino industry; every sale has to pass regulatory approval and that is often quite difficult. But when the legendary financial shark, Icahn is in the picture, it is far more complicated. Icahn always wants to make a profit on his investments; he is willing to wait years to get it. Icahn is only 77 and if he is anything like his investment peer, Kirk Kerkorian, he has another 20 years to wait. If Icahn is nothing else he is a patient man, a patient man playing a gaming of patience; this is not his first time around the block on the boardwalk or in gaming and it is not the first time he has waited to get his price. Icahn plays this game very well. “It’s as black and white as it can be: They can’t sell that casino without our consent. It’s not going for anywhere close to $20 million,” Icahn said. Billionaire investor Carl Icahn, who holds the mortgage on the Trump casinos, said Monday there is no way he will approve the proposed $20 million sale of Trump Plaza Hotel and Casino. Icahn, in an interview with The Press of Atlantic City, contended the price is simply too low, although he declined to say how much he thinks Atlantic City’s poorest-performing casino is worth. In the meantime, Trump Plaza’s sale to a California company is on hold. Donald Wittkowski, Press of Atlantic City, 4-23-13The gaming industry has matured a great deal in the last decade and Atlantic City illustrates just how much. Now, there are casinos in most states, and very few opportunities to enter new markets. New investors to gaming or existing corporations wishing to expand into other jurisdictions are therefore forced to buy existing properties. Since the recession and with the dramatic rise in competition, prices and conditions have changed a great deal. The casinos that have sold or are selling in Atlantic City in the last couple of years are going for about 10 percent of what they once commanded – just six or seven years ago. That means buyers have lots of opportunities. But it also means they have to be cautious, not every deal is a good deal and sometimes no price is low enough. With or without Carl Icahn, investing in any market in decline requires different skills than it did when the market was booming. In part it requires the skills of Carl Icahn; knowing when to buy and when to sell in today’s market is as important as knowing how to manage a casino.