Gambling on Retail in Atlantic City
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As New Jersey casino gambling celebrates its 21st year, a major national outlet developer is betting that Atlantic City’s casinos will provide enough traffic for a 410,000-square-foot outlet mall just outside the seashore city.

The Gateway Project, so named for its location at the entrance to Atlantic City, right after the Atlantic City Expressway’s final toll booth in Pleasantville, will contain 60 brand-name designer stores in its first 210,000-square-foot phase, scheduled to open sometime in 2000. Two more 100,000-square-foot phases are to be finished in the ensuing two years.

The developer, Prime Retail Inc. of Baltimore, Md. (410-234-0782), notes that this is the first outlet center serving the New Jersey Shore. Prime Retail’s holdings have tripled in just over two years. It had 17 centers totaling 4.3 million square feet in July 1996 and now owns and operates 50, totaling 14 million square feet.

The shops will be designed around a "village" theme, with wide, landscaped walkways between stores. Tenants’ names have not been released, but other Prime centers include such names as Tommy Hilfiger, Donna Karan, Nautica, Nike and GAP.

Competing retail centers in the area include the Shore Mall in Egg Harbor Township and the Hamilton Mall, as well as downtown Pleasantville itself, where a four-block stretch of Main Street is to be redecorated with wide, slate-blue sidewalks, old-fashioned lighting, landscaping, elaborate arches and murals, freshly painted facades and colorful awnings. The project, to be funded by an Urban Enterprise Zone (UEZ) which cuts the six percent sales tax in half and sets aside a portion of sales tax receipts for improvements, has already exceeded its original $1.3 million price tag, but officials say additional funding is no problem. Work is scheduled to start in spring 1999.

The Gateway Project also will be included in the UEZ, allowing its tenants to charge only three percent sales tax, a feature that is designed to lure shoppers. The center will be built on 53 acres Prime Retail has under contract on a bay island, between exits 2 and 4 along the north side of the Atlantic City Expressway and in close proximity to the Garden State Parkway. An adjoining 43-acre site is undeveloped but carries approvals for eight hotels with 1,600 rooms. Prime Retail plans to sell or lease that site to a hotel developer after it acquires the entire 96 acres from the owner, Gateway Associates.

The Gateway Project spent 10 years in the courts after the American Littoral Society sued the New Jersey Department of Environmental Protection for permitting retail development on the environmentally sensitive island, charging the DEP had violated its own rules. The state Supreme Court ruled in favor of the DEP in 1997.

A controversial tunnel and road system from the AC Expressway to Atlantic City’s Marina district will scoop up its share of visitors, but only after they pass the exit for the Gateway Center. Most of the legal and political battles over the $330 million tunnel appear to be settled, and casino mogul Steve Wynn’s Mirage Resorts Inc. is committed to contribute $100 million of his organization’s money for the roadway that will lead motorists to his new casino, Le Jardin, a $750 million, 2,027-room hotel with 138,000 square feet of gambling space, a 1,500-seat showroom, nine restaurants and an atrium retail promenade. Boyd Gaming Corp. (702-792-7200) of Las Vegas, meanwhile, plans to build a $500 million complex right next to Le Jardin, covering 150 acres and offering a variety of non-gambling attractions.

"Developers have been trying for years to tap into this lucrative market and Prime Retail is excited about becoming the first company to build an outlet center along the New Jersey Shore," said Prime Retail Chief Executive Officer Abraham Rosenthal. "Similar outlet centers in popular resort areas such as Hilton Head, South Carolina and Rehoboth Beach, Delaware have proven to be tremendously successful we look forward to bringing a premier value shopping opportunity for the first time to the millions of residents, visitors and beach-goers in the region."

"Strong demographics, including a residential population of nearly five million within 60 miles of the site; its proximity to the affluent beach communities along the Jersey shore, including Margate, Avalon, Stone Harbor and Cape May; and the more than 34 million tourists who visit Atlantic City annually make this a prime location for an outlet center," said William H. Carpenter, Jr., president and chief operating officer of Prime Retail. Atlantic County is said to be the fastest growing area in the country, predicted to double its population in the next 20 years, and the retail growth outside Atlantic City tends to confirm that vision.

Prime Retail says it intends to work closely with governmental agencies to facilitate necessary infrastructure improvements. Project commencement is also subject to the completion of customary due diligence, and a 50% pre-leasing threshold.

Meanwhile, retailers of all stripes are grabbing every piece of real estate they can find inside Atlantic City limits ­ and at premium prices, according to Susan McGaughran of NAI/Alper Commercial Realtors (609-345-1800), the firm serving as broker on the Gateway deal.

So, is it a gamble, or is it a sure thing? The "craps" on the dice in this case may be in the sheer volume and frenetic pace of development ­ could it end up being too much for the region? ­ and the high cost of the real estate itself. But with more visitors every year than Florida’s Disney World ­ 34 million compared to 30 million ­ it looks like a winner to Prime and other retailers.

"Land is at a premium, and retailers have to be real creative," McGaughran said. "Banks, pharmacies and fast-food restaurants all seem to be gobbling up whatever space is available... The proposed outlet mall ... has also increased interest in the Atlantic City area. The entire South Jersey area is booming. Retailers continue to be attracted to what is now considered the hub of Atlantic County, which is anywhere along the Black Horse Pike from Atlantic City to Hamilton Township. Add to that the normal expansion in a good economy and the ‘second wave’ in Atlantic City, and you’ve got a fantastic opportunity if you’re in retail."

New to Atlantic City within the past year, for example, are: Starbuck’s, Hooters, All Star Cafe, Hard Rock Cafe, Cosmopolitan Cafe, Sbarro’s, CVS Pharmacy and First Union Bank. Planning new construction are Pat’s Steaks, Commerce Bank and Eckerd Drugs, and committed to new sites but not yet arrived are Billows Electric and Dunkin Donuts.

The region’s first power center, Consumer Mall, a 1.1 million-square-foot complex, has blossomed in Atlantic County, next to the Hamilton Mall, the state’s seventh largest retail project at 1.3 million square feet, and close to the Atlantic City Racetrack and the Atlantic City Airport in suburban Atlantic County. Cumberland Mall has expanded with the addition of Boscov’s and the region has acquired new retailers in the past year the likes of Home Depot, Kohl’s, Target, Woodworker’s Warehouse, Canal’s Discount Liquors, Big Lot, Burlington Coat Factory, Basset Furniture, and restaurants such as Damon’s ­ The Place for Ribs, Outback Steakhouse, Lone Star Steakhouse, Applebee’s, Lamberti’s and Denny’s.

Questions as to whether any amount of retail development could be too much seem to fade in light of the $7 billion earmarked to be spent on Atlantic City’s "second wave" of redevelopment. This number exceeds the amount of investment of the first 17 years of gaming in Atlantic City, which is estimated at $5.6 billion, and is creating a second wave of growth for the city. The $268 million, state-of-the-art New Atlantic City Convention Center, "America's New Northeast Business Address," officially opened for business in 1997 and is considered the cornerstone of the redevelopment. The facility contains more than 500,000 contiguous square feet of exhibit space ­ more exhibit space on one floor than any other convention center from Atlanta through Boston and state-of-the-art voice, video and data business communications technology.

Linked by pedestrian bridge to the convention center is the Sheraton Atlantic City Convention Center Hotel, an $87 million, 15-story facility with 502 rooms, 29,000 square feet of meeting space, a 12,000-square-foot ballroom 18 meeting rooms and a board room.

A new, $14 million shopping center, the Renaissance Plaza, opened in 1996. Renaissance Plaza, considered a catalyst to the development of the central business district, consists of 70,000-square-feet of retail space.

A $13 million beautification project enhances the resort's sidewalks and thoroughfares. The beautification project was developed by the Atlantic City Special Improvement District and the Casino Reinvestment Development Authority (609-347-0500). Atlantic City's $84 million Grand Boulevard ­ consisting of Atlantic Park and Atlantic Plaza ­ welcomes visitors to the resort.

Atlantic Plaza features 20-foot-wide sidewalks for pedestrians and laser light displays from a 90-foot-tall lighthouse, cascading water and an elaborately landscaped park area incorporating all of the elements that have brought visitors to Atlantic City throughout the years, including the water, the sun and the seaside feeling of the resort. A 180-foot-long simulated boardwalk, with a gradual elevation nine feet above the ground, stretches from Missouri to Arkansas Avenues and leads pedestrians to the lighthouse. A 250-foot-long stone jetty, with water splashing against the jetty wall, borders Atlantic to Arctic avenues and is accessible to pedestrians. Large fountains consisting of 11 aerator jets shooting 30 feet into the air and nearly 400 rocks and boulders completes the seashore setting.

Atlantic Park, situated on a 35,000 square-foot area in front of Caesars Atlantic City Hotel Casino, provides a new gathering area for visitors to view the water and lighting display.

Historic Gardner's Basin Maritime Park is being developed into a major marine-themed educational attraction with a $4 million Marine Life Education Center, offering fascinating sea life exhibits, deep tanks and touch tanks featuring local marine species.

More than $478 million is being invested to substantially enhance Atlantic City’s infrastructure and transportation capabilities. Road infrastructure improvements are led by the $330 million tunnel project, which will link the new convention center and the resort’s center city area with the marina district via a roadway between the Atlantic City Expressway and Route 30. The project includes widening and reconfiguring Route 30, Huron Avenue and Brigantine Boulevard in the marina district.

Atlantic City International Airport completed a $17.7 million expansion, doubling the size of the airport terminal to 78,000 square feet, installing new all-weather jetways for boarding planes, and other amenities. The airport’s runway apron for parking aircraft has been doubled in size and the passenger parking lot has been enlarged by 600 spaces, and a large restaurant, bar and concession area enhance the terminal expansion. The project was completed by the airport owner, the South Jersey Transportation Authority, enabling the facility to accommodate 1.3 million passengers annually. In 1997, Raytheon Aircraft Services opened a $5.9 million, 62,700 square foot maintenance facility servicing corporate jets, and Midlantic Jet Aviation opened a $2 million, 20,000 square foot complex to handle business aircrafts.

A $30 million project will create new, wider corridors to the Boardwalk along Virginia Avenue, Martin Luther King Boulevard, Route 40/322 and various intersections, plus convert the resort’s Pacific Avenue one way uptown toward the northeast inlet end of the island, with a single return lane for Jitneys.

The New Atlantic City Bus Terminal officially opened in February, 1997 at a cost of $7.3 million. The new, state-of-the-art facility includes a 21 motorcoach platform, and the site of the 22,000-square-foot terminal is located at Atlantic Avenue, between Michigan and Ohio Avenues.

New Jitneys are making their debut along the resort’s streets. 192 sleek, 13-passenger Jitney mini buses are being funded by a $10 million federal grant and a $2.4 million loan from the Casino Reinvestment Development Authority. The Atlantic City Jitneys ­ the only non-subsidized, profit making mass transportation system in the U.S., carried 6.8 million people in 1996. The new colorful blue buses feature the logo, "America’s Favorite Playground," on the back, a lighthouse painting, and a line proudly stating, "Serving Atlantic City since 1915." The Jitneys are powered by alternative fuels, such as propane and reformulated gasoline, and some radio dispatched vehicles will be equipped with wheelchair lifts. The Jitneys operate 24-hours per day and will pass a Jitney stop an average of once every four minutes, forty-five seconds.

Atlantic City's campaign to rehabilitate its neighborhoods has resulted in substantial housing development throughout the city. Between 1986 and 1996, the Casino Reinvestment Development Authority (CRDA) invested $143.9 million to build 1,055 new housing units. The CRDA started construction on approximately 100 new housing units in 1997, an investment of more that $12 million.

The new housing is far from traditional "public housing," said Yvonne Doggett of the CRDA, but rather single homes for purchase at prices ranging from $81,000 to $500,000. The lower-priced homes are subsidized to bring the purchase price down, and in some cases a nearly 50 percent subsidy is provided. This is not unique to Atlantic City, but is done statewide in accordance with New Jersey’s affordable housing laws.

Despite the glitz of the casinos and the lure of the names and numbers bandied about by Realtors and bureaucrats, however, Atlantic City remains, for the most part, a slum. Step away from the casino district and you are in the netherworld of dive bars, hookers, dilapidated row housing and dirty streets that has been Atlantic City for decades. The boardwalk mostly offers one T-shirt shop after another. Non-gambling entertainment has not worked, despite the best efforts of competent real estate professionals, and the lion’s share of casino taxes earmarked for revitalizing the city has been pumped into bolstering the casinos’ businesses and greasing the streets for more casinos.

A prime example is Ocean One Mall, a two-level pier off the boardwalk that has been repositioned repeatedly, only to fail repeatedly, unable to attract the family-oriented entertainment trade ­ primarily because Atlantic City doesn’t foster a family atmosphere. Busloads of gamblers roll in, with their rolls of quarters, spend six hours and get back on the bus to go home. Conventioneers, as a rule, don’t bring their families and don’t venture beyond the casino districts except for an occasional jaunt to a local restaurant or an attraction outside the city, such as Smithville. This may bode well for the Gateway Project, positioned just outside city limits and loaded with outlet stores, but neither suburban development nor the stacks of housing being built by the city seem able to change the heart of Atlantic City.

Prime Retail is a developer, owner and manager of outlet centers. The company's current portfolio includes 50 outlet centers in 26 states, which total approximately 14 million square feet. As of September 30, 1998, Prime Retail's factory outlet center portfolio was approximately 96% leased. The company is a self-administered, self-managed real estate investment trust. For additional information, visit Prime Retail's web site at http://www.primeoutlets.com.

Alper Commercial Realtors is an Atlantic City, New Jersey based full-service commercial real estate company. Alper Commercial Realtors was established in 1988, and its principal, Lawrence Alper, has been associated with the commercial real estate profession in Atlantic City since 1984. Alper Commercial Realtors specializes in office and retail leasing, investment, property management, and tenant representation. Alper was a director of the Atlantic City and County Board of Realtors and in 1991 received the organization's Realtor of the Year award. Alper has had extensive experience as a broker and developer in the Southern New Jersey market, and was the managing partner of both the world famous Million Dollar Pier and the Steel Pier in Atlantic City.