Revel Sale Nearly Dead
Another chapter in the sad saga of the albatross that is the Revel Atlantic City casino was written this week, as attorneys for the property and its potential buyer were once again bickering in bankruptcy court. It also appears that this chapter may soon be over, as the odds of the sale closing are now quite slim.
The story dates back to early September, when the $2.4 billion Revel closed only about two years after it opened. The property was put up for bids with investor Glenn Straub, head of Florida-based Polo North Country Club, submitting the only bid by the September 23rd deadline. Rather than just accepting his $90 million bid and getting the deal done, the Revel still planned to hold an auction the next day. That auction was delayed until the end of the month, angering Straub.
It became apparent (whether it was intentional or not), that Straub’s was bid the “stalking horse,” setting the floor for all subsequent bids. When the auction rolled around, he increased his bid to $95.4 million, but Brookfield US Holdings LLC submitted a bid for $110 million in the middle of the night, telling Revel’s attorneys that the offer would expire at 6:00am October 1st. This made Straub even more furious, as he ranted about his life being put at risk because he didn’t expect to have to be away from home so long and didn’t have some medication he needed.
“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?” he told Judge Gloria Burns.
Brookfield’s bid was accepted. In November, though, Brookfield pulled out of the deal because of a dispute over Revel’s power plant, located next door. When the plant was being built, the Revel ran into cash flow problems and needed financial help to continue construction. ACR Energy Partners LLC finished the project, financing about $158 million. As a result, ACR and Revel came to an agreement that ACR would supply Revel’s energy and Revel would pay ACR back for the construction costs over a 20-year period. With interest, payments would be $1.5 million per month. Brookfield wanted to rework this debt as part of the Revel purchase, but the bondholders wouldn’t allow it, so Brookfield cancelled the deal.
That brings us back to this week. Monday was the deadline for the Revel sale to Glenn Straub to close, but it didn’t happen because of issues with the property’s tenants. Restaurants, the HQ nightclub, and the aforementioned power plant are all operated by outside companies. Those companies have invested millions in their businesses, but essentially exist at the whim of the landlord. Straub wants complete control over the entire property, including those businesses; the bankruptcy court that had approved the sale had said he could be totally free of any leases, meaning that if he wants, he can just kick everyone out, their investments be damned. The tenants appealed this decision and on Friday, the U.S. Third Circuit Court of Appeals in Philadelphia reversed the decision.
That was good for the tenants, but now the problem is that Glenn Straub won’t close the deal without the tenant situation figured out. He asked bankruptcy court Judge Gloria Burns for an extension until the end of February, but she denied his request. “Every party that has appeared before the court today has asked the court not to grant the extension,” the Wall Street Journal reported she said. “The contract speaks for itself; the time has expired.”
Straub’s attorney, Stuart Moskovitz, said that his client is eager to close, but he won’t do so without knowing “what we’re closing on.”
While the extension to February 28th was denied, Judge Burns did set a termination hearing for next Tuesday, so presumably all parties still have until then to try to hammer out the final details of a deal. If the sale doesn’t go through, Straub will forfeit his $10 million deposit to Revel.
Details of what Straub plans to do with the Revel property have changed over the months, but it is clear that he does not want to maintain it as a massive, Las Vegas-style , glitzy casino. He may keep a small casino running while converting other portions of it to more family-friendly entertainment. In September, the Press of Atlantic City painted an entirely different picture of what Straub wanted to do:
…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.