Thread by @StringwallApp

November 1983

RESORTS INTERNATIONAL UPS THE ANTE

nytimes.com/1983/11/13/bus…

ON a cloudy and cold October day, as the wind snapped with a bitter ocean chill, a group of local dignitaries gathered on a barren lot to break ground for Resorts International's second big gamble here - a new 1,000-room casino hotel and mammoth exhibit hall.

The scene was vintage Atlantic City - the crumbling remains of the Seaside Bar and Lounge loomed next door, a beauty queen with a Miss America crown waved at one and all and a Dixieland band belted out such tunes as ''I Want to Be Happy.''

It was a portrait of anxious optimism, a fitting backdrop for the company that won big on its first roll in Atlantic City and is now betting it all again.

This time the stakes are even higher. On the first roll, Resorts laid down a relatively modest $30 million to become the first casino operator in this aging resort - a gamble even veteran Las Vegas operators had shunned as too risky.

Now, after striking it rich, Resorts is beginning a second wave of construction that dwarfs its previous investment and will ultimately make it Atlantic City's biggest casino landlord.

''Resorts plays Monopoly - for real,'' said Daniel R. Lee, a gaming industry analyst with Drexel Burnham Lambert.

Already, Resorts' game board is studded with choice properties. It owns over half the city's casino-zoned sites - no one even comes close - and has snapped up attractive non-casino parcels that can be used for resort hotels or condominiums.

The October ground-breaking started an ambitious project that will include a new casino-hotel, an 80,000-square-foot exhibit hall and the renovation of the historic Steel Pier, the world's largest amusement pier.

Next year, Resorts plans to begin construction on a new railroad station, complete with yet another casino-hotel. And, the land that Resorts isn't developing is being leased to others - often generating more in annual revenues than the original purchase price.

''This is the second big dice roll for Resorts,'' said Howard J. Klein, associate publisher of Gaming Business Magazine, a trade publication.

''The first time, they got in cheap and hit the jackpot. They could be complacent and earn nice money. But, they are taking a significant gamble and, if they are wrong, it could be devastating.''

Resorts isn't the only company putting more hotels on the Atlantic City board, as a second burst of development sweeps the city.

New casino-hotels are being built by the New York developer Donald J. Trump, Hilton Hotels, and Showboat Inc. Golden Nugget is planning a second hotel-casino and Caesars and the Sands are expanding their existing operations.

But what sets Resorts apart is the extent of its investment here. In contrast to its more diversified brethren, Resorts is sinking nearly all of its corporate nest egg here, linking its own fate to that of the town.

Others may see this as chancy. Resorts does not. ''I consider it a moderate amount of risk,'' said James M. Crosby, Resorts' chairman, in his penthouse office at the Resorts' hotel here.

The anticipated price tag of the projects is about $500 million - some $100 million over last year's revenues and twice the size of Resorts' equity.

This big plunge is not uncharacteristic for a company that some say is run like a private fiefdom by Mr. Crosby, a 55-year-old reclusive entrepreneur who considers himself more a real estate developer than a casino operator. ''I'm not even much of a gambler,'' he added.

It was under the tutelage of Mr. Crosby - an ex-stockbroker whose office is littered with scale models of his planned developments and whose raspy voice is evidence of the ravages of emphysema…

…- that the company grew from a small Florida paint company called Mary Carter Paint, acquired by the Crosby family in 1958, to a controversial developer of casinos and hotels in the Bahamas. ⬅️⬅️🔥🔥

Along the way the company etched a history that is checkered with stories about dealings with those who have had brushes with the law. Nonetheless, the New Jersey Casino Control Commission granted the company a permanent gaming license in 1979.

Side Note: It is widely noted that the Mary Carter Paint Company shares its name with George HW Bush’s aunt, Mary Carter, wife of George Herbert Walker Jr.

en.m.wikipedia.org/wiki/George_He…

Mary Carter married George Herbert Walker Jr., and George Herbert Walker Jr’s sister, Dorothy Walker, married Prescott Bush. That’s how Mary Carter came to be George HW Bush’s aunt. And George HW Bush is presumably named after his uncle, George Herbert Walker Jr. Get it?

https://twitter.com/StringwallApp/status/1474897912744357892

''CROSBY runs Resorts like a private company,'' said Drexel's Mr. Lee. ''And it's his nature to go for the big win. As an investor, you have to ask: Do you trust him? That's because you are investing in his faith. He's ahead more than behind, but he doesn't always come out ahead.

If you buy Resorts, you're buying Jim Crosby.''

Clearly, Mr. Crosby's Atlantic City adventure has brought new life to a relatively small operation - Resorts' earnings jumped more than fifteenfold in its first year in Atlantic City.

But profits have dropped since those halcyon days as the recession, new competition and the costs of further renovation of the casino here have taken their toll.

Resorts earned $25.8 million on revenues of $385 million in 1982 - far below the $91 million it earned in 1979 on revenues of $360 million. For the first nine months of this year, Resorts had a gross win - the take from its gaming tables - of $197 million, second to Golden Nugget

Resorts has always been a high- flier - a sharp contrast to Mr. Crosby's reticent demeanor. A bachelor who has immersed himself in his work, Mr. Crosby rarely sits for interviews and, when he does, speaks in slow, carefully shaded sentences that reveal little of his personality.

But, his actions are often brazen.

In recent years, Resorts has used corporate funds for forays into the Treasury bond and commodity futures markets - much to the dismay of investors who felt that this was inapproriate speculation for a publicly held company.

It is a company that has invested in such esoteric operations as shrimp farming, that owns a commuter seaplane company, & that today has amassed a $100 million stockpile of gold, silver & copper reserves - activities that have left many investors confused over Resorts' next turn.

And, even its extensive Atlantic City landholdings have turned into a lightning rod for criticism from those who feel that far too many of Resorts' assets are being risked in one location, and others who say that Resorts is turning Atlantic City into a company town - its own.

''It's clear that to run a casino and be profitable, you don't have to own the town,'' said Richard Gillman, chairman of Bally's Park Place Casino Hotel.

''If Resorts is suffering from anything its the unknown - no one knows what they are doing next. I don't think the shareholders want them to speculate in land. Their company is public, but it is also a device to satisfy the ego of management.''

Yet there is no denying - even by critics - that Resorts has been enormously successful in its bet that casino gambling here would be a big business.

🤔🤔Even before the New Jersey casino referendum was passed, Mr. Crosby, a native of nearby Spring Lake, N.J., and other Resorts officials visited Atlantic City and began buying up property at rock bottom prices.

Where others - primarily Las Vegas casino operators - saw a decrepit slum and walked away, Mr. Crosby saw profits and started laying his money out.

Side Note: It’s almost as though Crosby considered the legislation to be a sure bet.

''When we first came here, what struck us was the low prices of everything here,'' he said. ''It was a shock that you could have a wide Atlantic beach here and there was no reason why land in Atlantic City should be worth so much less than beachfront property elsewhere.''

The reason was the city. Labeled the ''Queen of the Sea'' at the turn of the century, Atlantic City had fallen into decay and had turned into a tawdry collection of cheap rooming homes, white elephant hotels and sleazy boardwalk shops.

Unemployment ran high and an air of despair hung over the once-proud resort. When asked about the city's appearance - which despite the advent of modern casinos has not changed substantially - Mr. Crosby responded, ''That's an opportunity.''

THAT hunch of Mr. Crosby's has paid off. When Resorts opened its casino on Memorial Day weekend in 1978, it was the only game in town.

Revenues poured it at the rate of over $1 million day - faster than the company could even count it. This allowed the company to pay back its $30 million investment in a mere four months.

Bettors bought tickets just to be able to enter the casino and Resorts' profits shot up to $91 million in 1979 - an amount greater than their sales just two years earlier.

''I admire their courage,'' said Peter G. Boynton, president of Caesars Boardwalk Regency Hotel and Casino.

''Resorts was farsighted. They took an incredible risk and they were rewarded. With a relatively low cost of entry, they became monopolists in the classical sense and they ended up putting a lot of money into the bank.''

But Resorts' mark in Atlantic City has not entirely been its casino, rather it has been outstanding for its land deals:

Resorts purchased the Haddon Hall and Chalfonte Hotels for $5.5 million in 1976. It spent $30 million to turn Haddon Hall into a casino-hotel and, in 1979, sold the adjacent Chalfonte - which has since been razed - to Holiday Inns for $27 million.

Resorts bought the 54-acre Urban Renewal Tract - just adjacent to Haddon Hall - for $5.7 million and is now building on part of this land.

It has already leased 10 acres to Showboat Inc., a Las Vegas casino operator, for $6 million a year - in short, Resorts will get back more from Showboat in one year than it paid for the entire site.

Resorts has contracted to lease other parcels for non- casino hotels - to the Penta Hotel Group and Bass Brothers Enterprises Inc. - for undisclosed sums.

Five casinos and three hotels can be fit on the site. Resorts is also trying to sell acreage on the site to the city - at a fire sale price of $2 million - to entice local politicians into putting a new convention center right outside Resorts' doors.

Resorts recently acquired about 30 acres adjacent to the city's railroad station - an area that is zoned for casinos.

To receive some $30 million in Federal matching funds to rebuild the Atlantic City-Philadelphia rail line, Resorts is paying both the state's $8 million share as well as picking up the city's $12 million obligation.

Resorts paid the state $8 million in exchange for the 30 acres, and the state will use the proceeds from the sale for the rail project.

On top of that, Resorts plans to spend $150 to $175 million to build a new railroad station and a casino-hotel. It is undecided who will own the station, which has caused some critics to say that public companies like Resorts have no business owning quasi-governmental services.

Resorts bought 700 acres on Great Island, outside the city, for $750,000 prior to the opening of casino gambling. This is being touted as the next likely spot to be zoned for casinos.

Golden Nugget had paid a reported $1 million for an option to buy a small slice on the island from a different owner, but it has since let that option lapse.

Resorts paid $8.5 million in cash and $1.5 million in stock for an 8.5- acre site in the marina area - where Harrah's operates a casino and Hilton, Golden Nugget and Caesars are planning to build.

Side Note: ⬆️ This is a really interesting sentence, because by 1986, Trump will be a partner in the new Harrah’s casino and the new Hilton casino, and he will be chairman of the board & own a majority of Resorts International.

archive.fo/VnKqD

Resorts has announced no plans here; it is limited by law to operating a maximum of three casinos.

''We think of ourselves as resort developers rather than casino operators,'' said Mr. Crosby, a distinction that sets Resorts apart from other operators who buy land only when needed for casino ventures.

Some operators say they do this because they are casino operators, pure and simple. Others concede that they missed the boat in Atlantic City. By the time they got around to considering land acquisition, the price was too high.

''Why didn't others do the same thing - cash, that's why,'' said Caesars' Mr. Boynton.

BUT Resorts' expansion strategy has two inherent risks. One is that Resorts is banking on Atlantic City just as legalized gambling is being discussed elsewhere in the East.

The other is that Resorts is undertaking two huge and expensive projects at once, in a city known for cost overruns and where Resorts so far has undertaken only one relatively modest development project.

''There's little risk to Resorts in holding its land - they bought it for nothing,'' said William P. Weidner, president of the Sands Hotel & Casino. ''The risk comes when they start building on it.''

And they are expanding just as some are predicting a possible casino glut in Atlantic City. ''If I'm right, its going to be tougher sailing for a lot of casinos for the next two years,'' said Harold Vogel, a leisure time analyst with Merrill Lynch.

Cost overruns in Atlantic City have been devastating for some casino developers.

Such overruns, with their resulting high monthly interest payments, can hit hard in an industry where most of the costs of doing business are fixed - making the bottom line especially vulnerable to the slightest drop in revenue.

For instance, construction costs of the Tropicana Hotel and Casino ran some 300 percent over its initial budget, making it, at $340 million, one of the most expensive hotels in the world. Not suprisingly, the Tropicana was a money loser the moment it opened its doors.

But, the casino has since turned around after its parent company, Ramada Inns Inc., sold a number of hotels to pay off some of the Tropicana's debt.

Still, some are confident that Resorts can pull it off. ''I don't think Resorts is placing an undue bet,'' said Steven Eisenberg, a leisure analyst with Bear Stearns.

''They bought some of the best properties in Atlantic City and now they are among the most important beneficiaries of a growth that's even surprised the most skeptical person.''

Side Note: We might want to mention here that Bear Stearns financed this new casino project (which eventually became the Taj Mahal) by selling $600 million in junk bonds. So you might take the assessment of the Bear Stearns analyst with a grain of salt.

washingtonpost.com/archive/busine…

➡️➡️ We should also take note here that Jeffrey Epstein worked for Bear Stearns from 1976 to 1981, making partner in 1980. He remained close to Bear Stearns, CEO Cayne, and Chairman Greenberg, until Bear Stearns collapsed. 🔥🔥

web.archive.org/web/2019070821…

Side Note: Does that perhaps cause you to view the 2008 Bear Stearns bailout in a new light?

cbsnews.com/news/bernanke-…

➡️➡️ We should also note that Donald Trump told New York Magazine in 1987 that he started doing business with Bear Stearns beginning in 1982.

Although the first casino, Resorts is no longer the most profitable one in town. According to profitability measures compiled by Laventhol & Horwath, an accounting firm, Resorts ranks third.

Its operating profit before fixed charges represent about 21.9 percent of its revenues in 1982, compared with 32.3 percent for Harrah's and 29.2 percent for Golden Nugget and 28.5 for Bally Park Place.

''Is Resorts becoming less profitable? Yes and No,'' said Saul Leonard, a partner in that firm. ''Their facility is older and thus less efficient than the others and they've got competition that they never had before.''

But, what has really caught the eye of the financial community of late has been Resorts' speculation in the futures markets - an activity that has stirred the wrath of the investment community.

🤔🤔 Investors - especially institutional investors - have shunned the stock, arguing that these are overly speculative and improper investments for a public company - even one whose voting shares are more than 50 percent owned by Mr. Crosby and a handful of other outsiders.

''This tends to dissuade the investment community from taking them seriously,'' said Merrill's Mr. Vogel. Added Drexel's Mr. Lee: ''These simply aren't quality investments for a public company.''

IN 1981, Resorts began to buy Treasury bond futures contracts - ultimately to the tune of $100 million - on the expectation that interest rates would fall.

When they didn't, Resorts had to reflect the paper loss of these holdings on its earnings, including reporting a $20 million loss in 1981 that cut operating earnings in half.

The next year, when interest rates did fall, Resorts closed out these contracts and recorded a $43 million gain.

Resorts then shifted from financial futures to commodity futures and, more recently, has taken physical delivery of some $100 million in gold, silver and copper - about a quarter of the company's current assets - which it claims acts as a hedge against rising construction costs.

@sisu_sanity @clearing_fog @davetroy Resorts International hoarding gold in 1983? ⬇️

https://twitter.com/stringwallapp/status/1481683334354849798

It has said it will begin to sell off these holdings as construction on its projects proceeds. Still, these speculative activities are seen as yet another sign that Mr. Crosby runs Resorts as his own personal domain.

Mr. Crosby disagrees.

As he surveys the models of proposed Resorts developments in his office, he turns up his head and slowly begins: ''We're very stockholder-oriented - we do what we think is in the best interest of shareholders. We're high on growth and that's what most companies aspire to.''

🔥🔥 It was in the sunny Bahamas where Resorts International got its start in the hotel and casino business. There, in a lush Shangri-La called Paradise Island, Resorts owns three elegant hotels and the splashy Paradise Island Casino.

They contribute about 20 percent of Resorts' pre-tax earnings, and have been a retreat for such power brokers as former President Richard M. Nixon, his close friend Charles G. (Bebe) Rebozo and former Secretary of State Henry A. Kissinger. ⬅️⬅️⬅️🔥🔥🔥

The resort was even a temporary home to the exiled Shah of Iran.