Pinnacle accused of allowing landmark Atlantic City hotel to rot

Feb 14, 2009 | Posted by: roboblogger | Full story: Press of Atlantic City

Casino developer Pinnacle Entertainment Inc. is facing allegations it deliberately allowed a luxury hotel to deteriorate so it could buy it "on the cheap" to create more space for its proposed $1.5 billion ...

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#1
Feb 14, 2009
 
Pinnacle accused of allowing landmark Atlantic City hotel to rot

By DONALD WITTKOWSKI Staff Writer

(Published: Saturday, February 14, 2009)

ATLANTIC CITY - Casino developer Pinnacle Entertainment Inc. is facing allegations it deliberately allowed a luxury hotel to deteriorate so it could buy it "on the cheap" to create more space for its proposed $1.5 billion megaresort.

Pinnacle inherited the lease for the 14-story Madison House Hotel when it bought the Sands Casino Hotel in 2006 for $250 million from billionaire financier Carl C. Icahn.

The Madison, which opened in 1930 during the Great Depression, served as an adjunct hotel to the Sands starting in 2000. But when the Sands closed in 2006 and was imploded the following year, the Madison shut down as a hotel.

Now the Madison's private owners are accusing Pinnacle and its ACE Gaming LLC affiliate of violating the lease by not continuing the hotel operations. They claim in a Superior Court lawsuit that Pinnacle is in the process of "destroying the good name of the Madison House Hotel" by allowing it to rot.

"We perceive this to be a dying asset. It's nowhere near the grandeur of its former self," Philip D. Neuer, an attorney for the Madison House Group, said during oral arguments on the suit Friday. "We don't want this property to continue dying on the vine."

Pinnacle attorney Mark J. Briol declined to comment after the hearing. Company spokeswoman Carmen Gonzales said it is Pinnacle's policy not to comment on pending litigation.

Pinnacle and the Madison's owners are far apart in negotiations for the sale of the hotel. Although attorneys declined to divulge figures, Pinnacle Chairman Dan Lee said in a 2007 interview that the owners were asking $50 million for property he felt was worth about $2.5 million.

"It's a building they have put an extremely high value on," Briol told Superior Court Judge William C. Todd III.

Madison House Group is demanding unspecified damages from Pinnacle and ACE Gaming. For the moment, the case remains before Todd as it works its way through preliminary proceedings, although there is related litigation that could end up with the federal courts taking charge.

Pinnacle pays the Madison's owners $2 million annually on a lease that runs through 2012. The company has made no secret of its desire to buy the property and demolish it to create more room for a proposed Las Vegas-style casino overlooking the Boardwalk. Plans for the casino have been indefinitely delayed by the recession and global credit crisis.

According to the suit, Pinnacle has neglected the hotel in hopes that the city would declare it "blighted" and in need of redevelopment, allowing the company to acquire the property "on the cheap" instead of paying the true value. City officials, however, rejected Pinnacle's request to classify it as a blighted building, the suit noted.

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#2
Feb 14, 2009
 
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Now, the Madison's owners want Pinnacle to refurbish the building and run it as a luxury hotel. Pinnacle recently proposed transforming the Madison House into housing for foreign students who come to Atlantic City to work at the resort's casinos and other local businesses.

Neuer, the attorney for Madison House Group, alleged that Pinnacle would risk the safety of foreign students by allowing them to stay in a run-down building.

"They certainly allowed it to deteriorate," Neuer said. "It's a wasting asset. That's the only way to describe it."

When it first opened, the Madison House was considered a posh hotel. Constructed of red brick, the Colonial Revival-style building features marble floors, arched windows, chandeliers and an elegant staircase modeled after the one in Philadelphia's Independence Hall.

The Madison is listed on the National Register of Historic Places, giving it protected status but hardly an ironclad guarantee it will be saved from demolition.

E-mail Donald Wittkowski:

DWittkowski@pressofac.com

vince barth

Philipsburg, PA

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#3
Apr 26, 2009
 
pinnacle destroyed the area around the sands. closed the sidewalks and when complaints were received by city council, they had pinnacle replace the "SIDEWALK CLOSED--CONSTRUCTION" sign
to a sign that says "SIDEWALK CLOSED". The Sands wasn't the greatest, but it was better than vacant lots of dust, debris, fence and tarps. Was the neighbor of the Sands for over 25 years and never had a problem with them. sad to see them go. Can't understand how city council & casino control commission allowed them to destroy a business grossing over $600,000 a day with no guarantee of building, and lose all those jobs. I only had one meeting with dan lee and predicted their failure. What can you expect when the date to implode the Sands was selected to celebrate dan lee's birthday?

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#4
May 8, 2009
 
vince barth wrote:
pinnacle destroyed the area around the sands. closed the sidewalks and when complaints were received by city council, they had pinnacle replace the "SIDEWALK CLOSED--CONSTRUCTION" sign
to a sign that says "SIDEWALK CLOSED". The Sands wasn't the greatest, but it was better than vacant lots of dust, debris, fence and tarps. Was the neighbor of the Sands for over 25 years and never had a problem with them. sad to see them go. Can't understand how city council & casino control commission allowed them to destroy a business grossing over $600,000 a day with no guarantee of building, and lose all those jobs. I only had one meeting with dan lee and predicted their failure. What can you expect when the date to implode the Sands was selected to celebrate dan lee's birthday?
Mr. Barth, is your Park Lane still up and running?

And how about the old Post Office. Has it been taken down yet and the street widened from Pacific to Atlantic?

And what's going on with the law suite by the Madison House Group against Pinnacle?
vince barth

Philipsburg, PA

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#5
May 12, 2009
 
the park lane is still up and running. the PO is boarded up and closed, but still standing. new PO is at intersection of Indiana & Atlantic. the street remains the same. add this to the promise list of a supermarket and now a buyer for Bader Field. dont hold your breath. announcements will be made after the election. SOS.

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#6
Oct 29, 2009
 
Whatever became of the lawsuit against Pinnacle for allowing the Madison House to deteriorate? Is the hotel being rented out? Is the Post Office down yet? Is the Park Lane still open?

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#7
Nov 6, 2009
 
Madison House Litigation: On December 23, 2008, Madison House Group, L.P.(“Madison House”) filed suit in Superior Court of New Jersey, Chancery Division, Atlantic County against the Company, ACE Gaming, LLC (“ACE”, a wholly owned subsidiary of the Company), and one other defendant. We acquired ACE as part of our acquisition of the entities owning the former Sands Hotel & Casino (the “Sands”) in Atlantic City, New Jersey in November 2006. The lawsuit arises out of a lease dated December 18, 2000 between Madison House as landlord and ACE as tenant for the Madison House hotel in Atlantic City, New Jersey. The lawsuit alleges in part that ACE breached certain obligations under the lease, including, among others, failure to operate and maintain the hotel as required by the lease, which was alleged to have resulted in substantial damages to the hotel. The lawsuit further alleges that the Company, as the ultimate parent entity of ACE, should be jointly and severally liable with ACE for the damages sought, and separately alleges independent actions against the Company as described more fully in the lawsuit. The lawsuit seeks specific performance of ACE’s obligations under the lease, including restoration of the hotel, as well as unspecified compensatory and exemplary damages, and attorneys’ fees, against the Company and ACE. ACE continues to make its payment obligations under the lease, which expires in December 2012.
On January 7, 2009, ACE petitioned the United States District Court for the District of New Jersey for an order compelling arbitration. On September 29, 2009, the federal court denied the petition and ACE has appealed to the United States Court of Appeals for the Third Circuit. On February 18, 2009, the trial judge in the state court action issued an order staying the arbitration, which we have also appealed. Oral argument in the appeal of the state court order has been set for December 16, 2009. Discovery in the state court lawsuit has commenced. On July 17, 2009, the state trial judge denied Madison House’s motion for partial summary judgment on the issue of whether ACE’s non-operation of the hotel following the closure of the Sands constituted a breach of the lease. While the Company cannot predict the outcome of this litigation, it intends to defend the matter vigorously.

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#8
Jan 9, 2010
 
According to the New Jersey Superior Court website this case is moving forward. A recent motion filed by Madison House LLC for a site inspection was granted. It's scheduled for Feb. 3, 2010. What will the court find?
Rober Subranni

AOL

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#9
Jan 30, 2010
 
Our family has owned a building steps from the Sands site since 1945. I know Vice Barth is a gentleman,long time friend and speaks the truth. The crux of the problem began with the economic downturn and lack of money to develop, so pointing fingers does not help bring this "dead zone' around the old Sands site back to life.
However, the quality of the businesses and living in the area is very poor and it is time for The City of Atlantic City to take action to improve the "Illinois Ave" (Now Martin L. King) corridor by tearing down the old post office, compelling Pinnacle to clean up the street around their site and tear down their delapidated parking garage that blocks the view of the Historic Madison House. I don't believe the delapidated garage was left there to hurt the Madison House value, but some may argue that. It was, in my opinion, a lack of funds. The City of Atlantic City should tear this delapidated garage down and bill Pinnacle or lien the land. The city/Pinnacle should plant trees and landscape to help the "blighted" image of the area. ML King should be widened and shuttered buildings demolished. While we can't force Punnacle to spend money it does not have, the City can compel a clean up of the area and bring it "back to life" till Pinnacle builds or sells.
Time to move forward and mnake things pleasant for residents, tourists and people lucky enough to have jobs in the area. The time to act is now.
I challenge the city to finally do something and do it now.

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#10
Jan 30, 2010
 
Mr. S, do you know anything about the lawsuits against PNK in your neighborhood?

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