Pinnacle Buys Sands to Implode and Build New Property

The Sands is growing old

...and an adjacent parcel of land fronting the Boardwalk fro $250 million plus and additional $20 million for certain tax-related benefits and additional real estate.

The Sands has been one of the city’s weakest performing casinos and  a sale of the property has been openly discussed by many Atlantic City executives for the past couple of years. The question has never been if it would be sold, but when and to whom.

Now that the casino resort is being purchased from entities affiliated with financier Carl Icahn, it sets the stage for Pinnacle to build something that rivals the market’s top performers on the soon to be acquired 18 contiguous acres. An announcement marking the deal said the company will build a resort that is “among the largest and most spectacular resorts in the region.” Pinnacle expects to close its purchase of The Sands/Traymore site by the end of the year.

"Atlantic City is one of the top U.S. gaming destinations, and we're looking forward to being a part of the world-famous Boardwalk," said Daniel R. Lee, Pinnacle's Chairman and Chief Executive Officer. "This major new resort will be a key component in our plan to build a national network of gaming properties. It will also help extend our development pipeline and our Company's growth through 2010 and beyond. In connection with our longstanding interest in Atlantic City, we submitted our initial license application in New Jersey several months ago. The regulatory investigation is ongoing.

"The success of recent Atlantic City developments has proven that customers in the Northeast respond positively to state-of-the-art gaming resort design and amenities," Mr. Lee continued. "While we regret the necessity of closing the Sands to create an exciting new resort, we look forward to working with gaming regulators, state and local authorities on this project to create more jobs, tax revenues and other lasting benefits for the region."

As part of the agreement, Pinnacle required that the sellers proceed to close the existing hotel-casino, which is anticipated to occur within approximately 70 days of the signing of the agreement. The closure will facilitate the construction of a new, much larger facility as quickly as possible. The 26-year-old Sands, which was one of the first gaming resorts to open in Atlantic City, is one of the city's smallest properties.

Under Federal law, employees soon will receive 60 days' notice of the expected closing. Among its provisions for employees, the agreement provides for severance benefits in accordance with union agreements, as well as severance pay for nonunion employees who stay through the 60-day closing period.

"After spending many months reviewing various projects for this property, it became patently clear that a shutdown of The Sands was necessary and inevitable to make room for a great new casino,“ said Icahn. We also concluded that this was the most propitious time to undertake this shutdown given the robust employment environment in Atlantic City. This new casino will be a great plus for Atlantic City and the state of New Jersey."

The transaction is subject to the satisfaction of customary closing conditions. The transaction is not subject to financing. The majority stockholder of ACE Hi, AREP Sands Holding, LLC, which owns approximately 58% of the outstanding stock of ACE Hi, has delivered a stockholder written consent approving the sale of The Sands. AREP Sands is a wholly-owned subsidiary of American Real Estate Holdings Limited Partnership ("AREH").

Pinnacle already owns casinos in Nevada, Louisiana, Indiana, Argentina, and the Bahamas, owns a hotel in Missouri, and owns a casino site and has significant insurance claims related to a hurricane- damaged casino and hotel complex previously operated in Biloxi, Mississippi. Pinnacle also has two casino development projects in the St. Louis, Missouri area, which are dependent upon final approval by the Missouri Gaming Commission. The company is also trying to land a license to operate a casino in Philadelphia. Pennsylvania is allowing slot parlors to open for the first time and is awarding licenses late this year..