Ilitch family buying half of Atlantic City casino
Atlantic City, N.J. — A New York hedge fund said Tuesday it is selling as much as half its ownership of Atlantic City's Ocean Casino to the Ilitch family, owner of two major-league sports teams, a nationwide pizza chain and a casino in Detroit.
Officials of Luxor Capital Group LP told The Associated Press they have reached a deal with the Ilitch organization to acquire, through an affiliate, up to half the ownership of the casino.
The Ilitch group, which owns the Detroit Tigers baseball and Red Wings hockey teams, the Little Caesars pizza chain, and the MotorCity Casino Hotel, already has applied to New Jersey regulators for interim approval to own part of the casino.
Asked for comment, a representative for Ilitch Holdings Inc. shared the Luxor news release with The Detroit News, but did not directly comment on the announcement. The amount of the Ilitch family's investment was not disclosed. The deal would close after all regulatory approvals have been obtained.
“We are extremely excited about the proposed investment by the Ilitch organization, which, if approved, will give Ocean access to growth capital and provide a strategic partner to Luxor,” the hedge fund said in a statement. “We look forward to continuing to grow Ocean in partnership with the Ilitch organization for years to come.”
The Ocean casino opened nine years ago as Revel, the $2.4 billion resort that immediately ran into financial trouble, leading to two bankruptcy filings and its closure after just over two years of operation.
Colorado developer Bruce Deifik bought it in January 2018 for $200 million, and reopened it that summer. But he quickly ran out of money. Luxor, which was one of his lenders, assumed ownership of the casino in January 2019 in return for canceling Deifik’s debt. Deifik was killed in a car accident in April 2019.
In May 2020, New Jersey regulators gave Luxor final approval to own and operate the casino. At that hearing, Michael Conboy, a partner in the hedge fund, told regulators the company planned to own and operate the casino for at least the next 25 years.
Luxor said it would not discuss details of the partnership, including any impact on day-to-day operations of the casino-hotel, until it gets deeper into the regulatory process with New Jersey authorities.
For all of 2020, the casino's gambling revenue was over $214 million, a decline of more than 10% from a year earlier. But Atlantic City's casinos were closed for 3 1/2 months last year because of the coronavirus pandemic and continue to operate under restricted capacity limits.
It ranked sixth out of Atlantic City's nine casinos in terms of total gambling revenue, but third in terms of revenue from in-person gambling at its physical facility.
For the first nine months of 2020, the most recent statistics available, Ocean posted a gross operating profit of more than $12 million, compared with a $2.5 million loss in the same period a year earlier. It was the only Atlantic City casino not to post a earnings decline in the first nine months of 2020.
A news release issued by Luxor said the Ilitch organization "recognizes the success that the team at Ocean has achieved over the past two years and looks forward to working with the Ocean team and building on their accomplishments through continued investment in both the property and the customer experience."
Marian Ilitch, matriarch of the family, owns MotorCity Casino Hotel, one of the city of Detroit's three casinos. The venues, important sources of tax revenue for the city, were shut down by state order for much of 2020 due to the pandemic.
For the year, MotorCity generated more than $222.6 million in total adjusted revenue — down by more than 50% from 2019, when the casino generated more than $493.5 million.
Detroit's casinos have since reopened under capacity limits. MotorCity, according to the Michigan Gaming Control Board, has reported more than $64.4 million in total adjusted revenue through the first two months of the year.
The year is likely to bring some degree of recovery for casinos in Detroit as COVID-19 vaccinations continue to ramp up, though a recent surge in cases in the state has prompted city and state officials to sound the alarm about the potential for a third wave of the virus.
Still, casinos are benefiting from the launch earlier this year of legal online gaming and sports betting. Industry experts expect Michigan to join New Jersey as one of the top markets for legal online gambling in the country.
MotorCity offers online gambling via a partnership with platform provider FanDuel.
Meanwhile, another prominent Detroit business leader and real-estate owner, billionaire Dan Gilbert, has exited his casino investments in recent years, selling off Detroit's Greektown Casino in 2018 and selling his Cleveland, Ohio-area casino interests in 2020.
Staff writer Jordyn Grzelewski contributed to this report.