Revel Buyer Pulls out of Deal for Atlantic City Casino
In shocking news out of Atlantic City yesterday, the Press of Atlantic City reported that the deal which would have Brookfield US Holdings LLC purchased the Revel Casino-Hotel has fallen through. The deal breaker: a dispute over the property’s power plant.
The Intel District Energy Center is next to the Revel and supplies the energy for the property. Its construction was begun by the Revel, but after spending $42 million, the casino was unable to complete the building. The power plant did get finished, though, by ACR Energy Partners LLC, which had to finance about $158 million to take care of the project; a portion of that amount was paid to the Revel for the money it put into the building. According to the Press, 75 percent of the construction costs were covered by bonds issued by the New Jersey Economic Development Authority, while ACR chipped in a $40 equity investment.
As a result of all this, ACR and Revel became joined at the hip, as Revel was ACR’s only customer and ACR supplied all of the Revel’s energy. Part of the business deal between the two had Revel paying back ACR for the construction costs over a period of 20 years. With interest, those payments amounted to $1.5 million per month. The Revel claimed that these payments – $18 million per year – severely stressed the casino’s finances.
The Revel, which itself cost $2.4 billion to build, closed in early September after barely more than two years in operation. Brookfield US Holdings LLC won a short bidding war in October, agreeing to purchase the Revel for $110 million with the stated intention of reopening it as a gambling venue. At the time, there was no indication that there would be any problems closing the deal, but now, an issue regarding the power plant’s financing is rearing its ugly head. Brookfield wants rework the construction debt, but the bondholders will have nothing of it. As a result, Brookfield is pulling out of the $110 million deal, leaving the Revel searching for another buyer.
That buyer may be the runner-up from last month’s bidding, eccentric real-estate developer, Glenn Straub. Straub originally made a bid of $90 million for the Revel in September, shortly after the casino closed. He said his offer was an offer to take the Revel in a “new direction,” and based on what he said he wants to do with the property, it would certainly be one heck of a direction.
In September, the Press of Atlantic City described his vision as such:
…he wants to build a second tower at the property and colonize it with ‘geniuses’ working on pressing global problems, such as nuclear waste disposal. Wednesday’s discussion included talk of ‘high-speed catamarans’ to ferry people to and from Manhattan, ‘super jumbo jets’ to fly Arabian tourists into Atlantic City and a ski resort of elevator-equipped artificial mountains.
Straub has since said that he would reopen a casino on the property, but it would not be the primary attraction.
As it turned out, Straub’s $90 million offer served as a “stalking horse” for the Revel, meaning it set the floor for all bids to come. His was the only one accepted before the September 23rd deadline as determined by a court, so he felt he should have gotten the property. An larger auction was supposed to take place the following day, but was delayed until the final day of September, angering Straub. He claimed that the auction was pushed back just so the lawyers could bill more hours.
Then there was the situation when the auction was actually held. Straub increased his bid to $95.4 billion, expecting it to be accepted. Brookfield came in, though, and made its $110 million bid very late at night, telling the Revel’s attorneys that it would expire at 6:00am the morning of October 1st, just hours after the bid was made. Straub claimed that the timing put his life in danger because he was not prepared to have to stay away from home overnight and thus did not have a medication he needed, causing a “life and death situation.”
“So we’re trying to run with incapacitation, on my part, mentally, because I have a few extra pressures coming in here, to make you people, the creditors and the system, $20 million and you have to do this kind of stuff,” he said to bankruptcy court Judge Gloria Burns. “Why would you even allow somebody to go ahead and pressure you this way? That is unbelievable because you guys aren’t strong enough to stand up to people.”
He went further, saying he was completely out of sorts in a pre-dawn, almost manic state. “I was wandering up and down the streets, which is what caused my medical condition. It was cold, high anxiety. This is life and death here. How can they keep continuing to do this?”
Of course, now Straub says that Brookfield’s withdrawal was because of pressure he was putting on them, appealing the auction. His was the backup bid and he says he still has interest in acquiring the property.