Bart Blatstein: I Never Made Threats About Pier Shops

Tower signage at the Pier Shops earlier this month (Photo | Dan McQuade)

Yesterday was supposed to be the big unveiling of Bart Blatstein’s plans for The Pier Shops at Caesars, the half-empty mall over the ocean in Atlantic City. But it was abruptly called off late last week after Caesars filed a lawsuit accusing Blatstein “of having taken over the Pier’s lease from [a] third company illegally and without Caesars’ consent.”

Blatstein responded in court Monday to accusations in that lawsuit from Caesars Atlantic City president Kevin Ortzman, which included:

• Blatstein and his partners are in default in obligations to pay rent and taxes.
• “The Blatstein Defendants have no right to occupy, or assert dominion or control over the property.”
• “I personally met with Blatstein on February 10, 2015 … in that meeting Blatstein made clear his intentions concerning his illegal use of the property. Among other comments Blatstein stated to me, ‘You can’t win and I can’t lose.’ Blatstein went on to threaten, ‘I’ll drag this out in court and suck all of the money dry from the Pier and you’ll be left with nothing.’ Blatstein further threatened that ‘I’ll get my money back and you’ll still end up with nothing.’ Additionally, Blatstein stated ‘I’ll blast you in the Press as uncooperative to a ‘hero’ trying to save Atlantic City — [Caesars will] lose in the court of public opinion.”
• “The Blatstein Defendants occupy the Property illegally as trespassers as a result of an improper agreement.”

Blatstein specifically denied making threatening comments in documents filed on Tuesday (below): “I told Mr. Ortzman earlier this month that we need to work this out quickly because the occupancy is below 50% and will accelerate, and the Pier Shops will empty, with prolonged uncertainty. I did not threaten to drag this out in court. Our latest offer was rejected without any counter or suggestion for a continued discussion.”

How did we get here? The Philadelphia developer and casino architect Paul Steelman purchased the mall, called the Pier Shops, late last year. But Caesars owns the actual pier and says it must approve all transfers of the lease.

The 295,000-square-foot Pier Shops at Caesars were developed in the early 2000s and opened in 2006. Gordon Group Holdings and Taubman Centers envisioned a luxury mall that would attract tourists and gamblers in Atlantic City. “It’s not in the midst of tumbleweeds, so you don’t need to take a plane to get there,” Sheldon Gordon told Forbes in 2006. “It is within driving distance of one-fifth of the U.S. population.”

Gordon signed a 75-year lease with Caesars in 2003. Michigan-based Taubman eventually acquired majority control of the mall and still had high hopes for a mall that was 98 percent leased and committed in early 2007. “The Gordon Group has created a truly magnificent shopping center,” Taubman Centers chairman Robert Taubman said when his company assumed management and leasing control in 2007. “Its premier collection of retailers and fine restaurants has already made it a prime shopping and dining destination for residents and visitors alike. We look forward to building upon the momentum that the Gordon Group has created.”

The third floor of the Pier Shops in late summer 2014. The sand has since been removed. (Photo | Dan McQuade)

“I would call it fascinating, very interesting and very creative as retail goes,” said Matthew L. Ostrower, a REIT analyst at Morgan Stanley, told the New York Times before the pier opened. “But I would also call it high risk. They are in uncharted waters here.” That high-risk didn’t pay off. The recession delivered a blow to high-end spending and Atlantic City saw fewer gamblers than it expected due to competition from Pennsylvania and other states. The mall is now nearly 50 percent empty, though it still attracts huge crowds to the Apple Store and on a recent weekend was relatively busy in the stores that were open.

An empty Pier Shops at Caesars (Photo | Dan McQuade)

In 2009, Taubman ceased offering financial assistance to the mall. The bank completed a foreclosure in 2011. It was sold in 2011 for $25 million to U.S. Bank and several partners. C-III Capital Partners attempted to sell the mall again in 2012 but was unable to; the highest bid was $25 million. It was appraised at the time at $56.6 million.

Torchlight Loan Services eventually sold the mall’s lease — which runs through 2078 — to Blatstein for $2.7 million last year. But Caesars says it must approve any transfer of the lease, and is seeking to recoup millions in rent and taxes. Caesars Entertainment — the parent company of Caesars, Bally’s and Harrah’s in Atlantic City — filed for bankruptcy earlier this year.

The Water Show, before and after its removal. (Photos | Dan McQuade)

Tower Investments recently removed a fountain that hosted The Water Show — which had been closed for months — at the back of the 900-foot-long pier. It also had lots of signs in the building advertising for prospective tenants. The Inquirer reports most of the Tower Investments signs have been taken down since Caesars’ lawsuit. The casino wants a judge to prevent Blatstein from occupying the mall. (“Caesars claims Blatstein ‘has no right to be there’ beyond, presumably, going to the Apple store himself,” the Inky’s Amy Rosenberg writes.) “There’s this notion that he somehow bought the Pier, which is false,” a Caesars attorney said.

In a response, Blatstein said Ortzman’s filing was the first he’d heard of Caesars’ objection to his plans for the Pier Shops. He also said he’s now concerned with Caesars stealing his plans for the mall, which he said he left with Ortzman during a meeting. “Caesars’ conduct gives me deep concern that it will attempt to use my plans, ideas and draws for its own purposes,” Blatstein said in a filing. “I did not give it any consent or authorization to do so. Rather, I shared them in good faith as part of a continuing effort to secure consent and finalize the business deal.” Blatstein says Caesars’ fight imperils the creation of hundreds of new jobs in Atlantic City.

Lawyers for the two sides will conference again on Thursday.

Follow @dhm on Twitter.

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