Icahn stands pat with Atlantic City casino

John Curran

Thursday, March 13, 2003 | 9:43 a.m.

ATLANTIC CITY -- When it comes to investing, Carl Icahn believes, patience pays off.

The philosophy has helped the 66-year-old corporate raider amass a fortune estimated at $5.8 billion.

But it may be a gamble when it comes to the Sands Casino Hotel, the little casino he pulled out of bankruptcy 2 1/2 years ago.

Icahn, who has done precious little to reverse the fortunes of the city's second-smallest casino, has no plans to add hotel rooms or retail space anytime soon.

Facing stiff new competition from the 2,010-room Borgata Hotel Casino & Spa, which opens here later this year, Icahn sees no need for the kind of investment other Atlantic City casinos are making in hopes of holding on to customers.

"I look at investing a different way, not from an immediate gratification standpoint," he said Tuesday.

"I look at things in a more long-term way, from year-to-year, not day-to-day or month-to-month. I think this is a good investment. The return on equity is going to be fine. Sometimes you make mistakes, but I don't think this is one of them."

Others aren't so sure.

The 600-room Sands is the perennial weak sister among Atlantic City's 11 casino-hotels. Saddled with a difficult location, near but not on the Boardwalk, it has struggled for years against its bigger, more visible competitors.

Last year, while Atlantic City casinos as a whole were posting a 1.8 increase in revenue, the Sands' plunged 11.4 percent. It had gross operating profits of $20.8 million, second-smallest in Atlantic City.

With the $1 billion Borgata set to open in July or August, other casinos have made big-ticket improvements in hopes of stemming the flow of curious gamblers to the first new casino in town since the opening of Trump Taj Mahal in 1990.

"When the Taj opened, a lot of people said the smaller properties were going to get destroyed, but that didn't happen," said Roger Gros, editor of Global Gaming Business, a trade publication. "They survived as small places that catered to mid-level and smaller players, and that could happen again. If they can carve out that market before Borgata opens, they can survive. But they (Sands) have to get the ship righted before the Borgata opens, and it's a big task."

For now, Icahn is hoarding his chips.

The casino has $40 million cash on hand, but will put out only $11 million for capital expenditures this year, according to CEO Richard Brown, who has restored table games eliminated last year, hired back player development executive Bill Cooney and embarked on a new marketing campaign to be unveiled next week.

Ideally, Icahn wants to get his hands on the seven-acre parcel that stands between the Sands and the Boardwalk, which would allow him to build out to the beach, increasing visibility and traffic to the casino.

But the lot is owned by casino giant Park Place Entertainment Corp. of Las Vegas, which Icahn outbid for the Sands and is unlikely to part with, for competitive reasons.

He's content that the Sands has what he says is the strongest balance sheet in Atlantic City, and he isn't worried about losing business to the Borgata.

"We think it's a plus for us. It's going to bring more people to Atlantic City. It will enhance our business," Icahn said.