Stockton Sells Showboat to Developer, Reports Former President Misled Trustees
University will lose money on transaction but will free itself from Atlantic City entanglement
Stockton University officials on Friday announced that they’d agreed to sell Showboat Atlantic City to Philadelphia real estate developer Bart Blatstein, who first entered the Atlantic City market by buying The Pier Shops at Caesars last spring and renaming the mall “The Playground.”
The announcement comes three days after Stockton publicized the findings of an independent investigation that says retired president Herman Saatkamp -- who planned to use Showboat as a campus annex -- failed to tell trustees about two contradictory land-use restrictions. One prohibited buyers from using the building as a casino; the other prevented its use as anything but. The report goes on to say that Saatkamp lied to investigators about his role and unknowingly employed an attorney who isn’t licensed to practice law in New Jersey.
While the sale closes an unhappy chapter in Stockton’s recent history and frees it from the tangled web of Showboat's land-use restrictions, some sizable questions remain. How did the school’s systems break down to such an extent that their president and several trustees resigned as a result? Who is Bart Blatstein and can he help reverse Atlantic City’s fortunes? Will Stockton students have to pay for the miscalculation? And will they ever find their long-sought home in Atlantic City?
After a closing expected around November 9, the tangle over the land-use covenants should no longer burden Stockton. According the agreement of sale, Blatstein’s Tower Investments will buy the property for $22 million, regardless of its legal status. The amount represents a financial loss for Stockton, which bought Showboat for $18 million in December and has spent $500,000 to $600,000 per month to maintain it.
The price is also less than Stockton would have made by selling Showboat to Revel casino owner Glenn Straub, who bought -- but didn’t close on -- the property for $26 million. The controversial Straub sued Stockton this spring to buy time for the land-use restrictions to be worked out in court while he maintained his hold on the property. A judge allowed Stockton to back out of the deal and the school’s administrators set about to find a new buyer.
On September 11, Stockton executed and delivered a sales agreement to Tower. University trustees approved the sale after a closed-door session on Wednesday, and after a two-day period of due diligence, the media relations office released the document to the public. According to the agreement, Blatstein must hire Stockton interns to work at the property and refer golfers to the Stockton Seaview Hotel and Golf Course. In addition, Stockton can use the property’s former House of Blues concert venue for events rent-free six times a year for a decade.
“Stockton’s then-President, Dr. Herman J. Saatkamp, a visionary leader during a period of extraordinary growth and progress at the University, was deeply committed to the purchase of the Showboat, for good and legitimate reasons,” according to the report. “Thus, while the wisdom of the transaction could have been and was debated, Saatkamp’s advocacy for it was not based upon any illicit motive or self-dealing.”
That comment from the authors of an independent report requested by state lawmakers and commissioned by Stockton marks one of the only compliments paid to the once-powerful former president. The next line reads, “Saatkamp’s leadership style and haste to obtain approval of the deal” inhibited debate among trustees. It also kept him from telling them two very important facts: Showboat’s seller, Caesars Entertainment Corp., couldn’t convince representatives from Trump Taj Mahal to waive a 1988 covenant that prohibited the property’s use as anything but a high-end casino hotel. Caesars had promised to indemnify Stockton from legal costs it might incur fighting the covenant -- a promise it couldn’t keep after it declared bankruptcy one month later.
Further, Saatkamp didn’t try very hard to negotiate a waiver of the covenant, and he didn’t realize before signing a subsequent agreement of sale with Straub that the Revel’s litigious owner had altered the contract to hold the president responsible for doing just that. Finally, the report accuses Saatkamp of lying to investigators about whether he knew about the 1988 covenant before closing. According to the authors, he did. But he didn’t consider it a meaningful impediment to his plans.
Not that Saatkamp bears full responsibility. The uthors say that the lead attorney for this transaction, Steven Sandberg, a partner at Florio Perrucci Steinhardt & Fader LLC, may have broken the law by involving himself so deeply without a New Jersey license -- a fact he did not disclose to Saatkamp. They also say that he downplayed the fact that Caesars’ attorneys told him hours before closing that they hadn’t obtained a waiver from Trump, and yet he told Saatkamp to go for it. And when it came time to sell the property to Straub, he missed the alteration that Straub’s attorneys inserted at the last minute.
Further, the authors note that although Trump cooperated with their investigation, Caesars did not. They maintain that, Caesars “repeatedly misrepresented, prior to closing, that a waiver of the 1988 Covenant would be forthcoming from Trump when there was no reason to believe that it would be, at least not without substantial additional negotiations and the approval of a Bankruptcy Court.” Without those false assurances, authors say, “Stockton would not have closed on the transaction.”
Saatkamp couldn’t be reached on Sunday evening but told the Press of Atlantic City last week that outside counsel bore the brunt of the responsibility.
“Nothing in the … report released today changes my fundamental, deeply rooted belief that as president of the university, I acted in the best interest of the university and the citizens of New Jersey,” he said.
Showboat’s next owner
Fresh off failing to win a casino license for the former headquarters of the Philadelphia Inquirer and Daily News, Blatstein, who turned Philly’s aging Northern Liberties neighborhood into a hip destination, is waiting to announce his plans for the 1.73 million-square-foot Showboat. But with his agreement of sale, which follows his recent purchase and transformation of part of The Pier Shops at Caesars into an entertainment venue, he appears to be investing some serious capital in Atlantic City’s future.
“I like to have a larger footprint,” he said by phone early this morning. “I felt Atlantic City was very worthy (of re-investment) because of my childhood memories of it. I wouldn’t be here if I didn’t believe in its resurgence and rebirth.”
“The agreement allows the university and Mr. Blatstein to continue working together in ways that will benefit Stockton and contribute to Atlantic City’s renaissance,” interim President Harvey Kesselman said in a statement. ”We were seeking a purchaser who demonstrated a commitment to Atlantic City when others were unwilling. Bart Blatstein is such an individual.”
This summer, Blatstein submitted proposals to the city for two other underutilized properties. Responding to an RFP, Blatstein suggested that the Kennedy Plaza West Pavilion near Boardwalk Hall could be turned into an outpost for local food and live entertainment. Garden Pier, currently the site of The Atlantic City Historical Museum, could become a "multi-faceted entertainment destination with art, music and food” and maybe even an oceanfront hotel.
But the fate of T Street, the formerly empty part of The Playground that Blatstein has converted into a series of music and entertainment venues, has puzzled observers.
Concerts at the main music hall have been canceled, and Blatstein’s facing lawsuits from tenants over property maintenance and some visitors to the space say they notice large numbers of cooks, chefs, and bartenders being let go. One source who didn’t want to be identified gave up on trying to plan a group social event at T Street, The Playground’s music and entertainment wing, emailing, “Not sure if the Playground / Tstreet are doing well business wise … but there doesn't seem to be much interest from contacts in assisting.”
Plus, he’s involved in at least one lawsuit over property maintenance The Playground.
Blatstein declined to comment on the lawsuit but said that the concert cancelations were caused by last-minute performer bookings that led to low sales. Noting that he’d rushed to open T Street quickly -- and one week ahead of schedule -- this summer, he said he was following a model he’d created in Northern Liberties that has him owning and operating his facilities then turning them over to individual tenants as he learns the market. He says he’s already lined up tenants for each of T Street’s eight venues and will announce them in two weeks.
“To do a lease it takes six to 10 months. I shortcut it,” he said. “In the interim, I try a lot of different things.”
He added that he’d signed several new tenants and anticipated opening a bowling alley by next summer, along with an beach club and hotel rooms on the roof.
Anyone skeptical of Blatstein’s ability to reinvent rundown communities should consider his track record in Philadelphia. Starting in 1978, Blatstein ignited redevelopment in at least four important districts (Northern Liberties, Manayunk, Columbus Boulevard, and North Broad Street at Temple University) by building residential towers, pedestrian malls, entertainment complexes, European-style piazzas, and shopping centers -- both big-box and boutique.
His latest large-scale purchase in Philadelphia is the North Broad Street tower that housed the city’s two main daily newspapers until 2012. After losing a bid for the city’s second casino license last year, he revamped his plans toward a reported $36 million boutique hotel with dining and restaurant space that he hopes to break ground on next summer.
Stockton’s present and future
Stockton’s administrators have repeatedly insisted that students will not pickup the tab for any costs associated with the Showboat transactions. They’ve pointed to a private fund that was used to buy Showboat and say they hope the resolution of various lawsuits will help them recoup some money.
But the Showboat was going to be used, in part, for student housing. Constrained by growth restrictions in the surrounding Pinelands National Reserve, Stockton is quickly outgrowing its current facilities and has looking to build in Atlantic City for years. Interim President Harvey Kesselman says he won’t consider any more casinos or hotels (an offer to buy the Atlantic Club hotel fell through in 2014) and will build from the ground up. One site under discussion is the AC Gateway mixed-use development that’s slated for land that sits at the foot of Route 40 and is owned by the Casino Reinvestment Development Authority.
Despite its troubles, Stockton enters the current school year with two pieces of good news. U.S. News & World Report has ranked it among the top 15 public regional universities in the north as it begins its first full year as an official university (rather than college). And trustees have offered the president’s job to the popular Kesselman, an administrator who stepped in to fill the role after Saatkamp resigned, despite having accepted a job as president at a university in Maine. The trustees’ executive committee will hash out compensation and contract terms at a December 2 meeting.