August 12, 2014
By Jonathan Berr
Atlantic City’s $2.6 billion Revel Casino Hotel opened two years ago amid expectations it would transform the struggling Jersey Shore town, but it’s closing its doors Sept. 10 after failing to find a qualified bidder for the property in a bankruptcy auction. However, some advocates, such as Atlantic City Mayor Don Guardian, aren’t ready to write the resort’s obituary quite yet.
In a press release, Guardian said the city was “disappointed” by Revel’s decision “as there appeared to be several bidders for the property.” He added: “This might be Revel’s last chapter, but not the last one for this building.”
Sharing Guardian’s optimism is Dr. Israel Posner, who heads The Lloyd D. Levenson Institute of Gaming Hospitality & Tourism at New Jersey’s Stockton State College. He told CBS MoneyWatch, “I don’t think the fat lady has sung yet on this issue.”
Posner said he wasn’t aware of any investor or group of investors that might be interested in Revel. But just because Revel wasn’t successful as a casino “doesn’t mean it won’t work for any purpose,” he said. “There is nothing like it anywhere.”
A spokeswoman for Revel declined to comment beyond a statement issued earlier today announcing the closure. Revel is one of three properties in Atlantic City now slated to shut because a casino glut in the Northeast has caused their customer bases to dry up. The statement, however, left open the possibility that Revel could continue as something other than a casino, saying the company would continue searching for a buyer interested in pursuing such a strategy.
“We hope that Revel can be a successful and vital component of Atlantic City under a proper ownership and reorganized expense structure,” Revel’s statement says, adding that it was offering no assurances that its efforts would be successful.
If Revel goes dark, more than 3,000 workers will lose their jobs, and it wouldn’t be the only Atlantic City casino to go out of business this year. Showboat, which is owned by Caesar Entertainment (CZ), is due to close Aug. 31, followed by Trump Plaza on Sept. 16. Shares of Caesar’s were crushed this afternoon, tumbling more than 8 percent.
Revel’s history has been troubled from the start. Morgan Stanley (MS), one of the property’s original investors, walked away from the project in 2010, taking a write-down of about $1.2 billion. The Wall Street bank sold its stake to Revel’s developers. Republican New Jersey Gov. Chris Christie had arranged for Revel to get $260 million in tax credits to build the the resort. It has never been profitable.
Many casino industry observers faulted Revel for its business model, which placed more of an emphasis on luxury rather than gaming. The company decided to do without staples of other casinos, such as buffets, and it didn’t court day-trippers who visit Atlantic City via bus.
“Everything about that business plan was wrong,” said Alan Woinski, president of consulting firm Gaming USA Corp., in an interview. “Nothing made sense.”
Revenues at Atlantic City casinos have plunged 45 percent between 2006 and last year, to $2.86 billion in 2013. It’s a sure bet the declines will continue for the foreseeable future.
Doubling Down on Gambling in Atlantic City
By Kate Zernike
Revel casino recovery plan OK’d by NJ regulators; smoking ban abandoned
By Asbury Park Press
So with over a dozen casinos in AC, there weren’t enough nonsmokers who hated smoke so much to make even a single casino viable??? And yet the Antismokers insist, over, and over, and over again, that smoking bans don’t hurt business.??
And just last week the heads of the antismoking groups in St. Joseph, Missouri emotionally raved to the City Council that not only do bars and casinos survive smoking bans, they do BETTER with smoking bans!? And yet… not enough customers to fill even ONE casino in Atlantic City.
So… somebody must either be incompetent, or they are lying.? Which is it?? The Antismokers who make these proclamations have all kinds of information and statistics at their fingertips they love to recite, so they can’t really claim simple ignorance.? They *could* be incompetent, but a lot of them have Ph.D.s? (When you hear them making health claims and they have a “Dr.” before their name, double check it: I’ve some out there, one just this week, whose claim to being? Drs. lie in Ph.D.s in “Mechanical Engineering” or “Educational Leadership.”? Seriously.)?
And these people pull in humongous amounts of money to push smoking bans on people who don’t want them enough to simply walk to a casino a few feet away from the smoking ones that they’re in.
So… if it’s not ignorance, and it’s not incompetence…? You be the judge: WHY do they make these claims, AND… are they lying??
Read? http://kuneman.smokersclub.com/PASAN/StilettoGenv5h.pdf “V.Gen5H” and read “The Lies Behind The Smoking Bans” and see what else they’re lying about.
NJ’s bankrupt Revel suffers fate of other casinos
By WAYNE PARRY
ATLANTIC CITY, N.J. (AP) — From the day it opened last April, Revel insisted it was a different kind of casino.
It shunned bus-riding day-trippers, banned smoking, hired a mostly nonu nion workforce and told employees they’d have to reapply for their jobs every five years or so. It concentrated on the well-to-do leisure traveler and the business client instead of the slot-playing granny and opened up views of the ocean with floor-to-ceiling windows in a seaside resort where everyone else sought to keep gamblers focused on gambling.
Yet less than a year after it opened, Revel finds it has become like many other Atlantic City casinos: drowning under way too much debt, fighting for a share in a shrinking market and preparing for a date in bankruptcy court with major questions about its future looming large.
Revel said Tuesday that it will file for Chapter 11 bankruptcy protection in late March. The voluntary, prepackaged bankruptcy will wipe away about two-thirds of its $1.5 billion in debt by converting more than $1 billion of it into equity for lenders.
Kevin DeSanctis, Revel’s CEO, said the restructuring will give the casino resort more flexibility to operate, calling it “a positive step for Revel.”
“The agreement we have reached with our lenders will ensure that the hundreds of thousands of guests who visit Revel every year will continue to enjoy a signature Revel experience in our world-class facility,” he said.
Existing management will remain in place, no layoffs are planned, and employees and vendors will be paid as usual, the company said. The restructuring should be completed by early summer.
The $2.4 billion casino never caught on as much as it had expected to, and it remained mired toward the bottom of Atlantic City’s 12 casinos in terms of casino revenue. Revel had to line up two rounds of additional financing since August to keep operating.
In January, it posted its second-worst month, winning less than $8 million from gamblers. During the second and third quarters of last year, it reported gross operating losses of $35 million and $37 million.
Revel’s largely nonu nion stance earned it the undying enmity of Local 54 of the Unite-HERE u nion, representing most of the city’s casino workers.
“Over three years ago, Local 54 began expressing to every elected official in the city, the state and the governor’s office that this project was doomed to failure,” said Bob McDevitt, the u nion’s president. “Had they listened to us three years ago, we would not have this catastrophe on our hands now.”
Michael Drewniak, Gov. Chris Christie’s press secretary, expressed confidence in Revel.
“We are committed to the resurgence of Atlantic City, the tourism district, and the many efforts currently under way to bring world-class attractions and entertainment to the city,” he said. “A rejuvenated Revel will remain an integral part of that landscape, as it continues full operations as a premiere hotel, gaming and top-flight entertainment hub for the city, in addition to employing more than 2,000 people. Most importantly, none of those things that make Revel among Atlantic City’s highest-profile attractions will change, as Revel uses this new financial flexibility and the continued backing of its investors to grow the business and be part of Atlantic City’s expansion.”
David Rebuck, director of the state Division of Gaming Enforcement, said the Chapter 11 filing needs to happen.
“The agreement between Revel and its lenders will allow for a necessary financial restructuring and improve the property’s financial condition going forward,” he said. “We see this as a positive step that will allow Revel to comprehensively address its financial needs while continuing normal business operations.”
It is the latest in a series of recent bankruptcies involving Atlantic City casinos. Trump Entertainment Resorts emerged in 2010 from the third Chapter 11 bankruptcy that it or its corporate predecessors had filed, and the Tropicana Casino and Resort was sold that same year out of bankruptcy court to billionaire Carl Icahn.
As part of the restructuring, some of Revel’s lenders will provide approximately $250 million in debtor-in-possession financing, about $45 million of which constitutes new money commitments and approximately $205 million of which is prepetition debt. No taxpayer funds will be used to finance the restructuring, the casino said.
The company didn’t identify which lenders will be part of the filing; it said only that “a majority” of its lenders have agreed.
Revel was the first new casino built in Atlantic City since the Borgata Hotel Casino & Spa opened in 2003.
It was an ambitious, risky project in a declining market. It saw itself not as a casino resort but as a resort that happened to have a casino. But the distinction seemed to have been lost on many customers, who found its restaurants and hotel rooms pricey.
The project had to overcome numerous obstacles before its opening. Three key executives working on the project died in a Minnesota plane crash in July 2008; a worker pouring concrete was struck by lightning and killed in 2011.
The project ran out of money during the recession and had to stop construction halfway through. Morgan Stanley pulled out, taking a $1.2 billion loss on the project. It only got completed with the help of state tax incentives that were approved in February 2011.
I found it interesting that the casinos’ profits are down 22% and they’re blaming the economy and competition as well as the smoking ban.
Why did I find it interesting?? Because Minnesota’s casinos’ revenues ALSO fell by 22%… except that was a fall over a five year period ending in 2007, and it was a fall that had only one thing in common with Atlantic City’s: a smoking ban.?? If you look at the official Minnesota Charitable Gambling Report covering the period 2003 to 2007 you see a sharp distinction between the two years prior to their ban and the 33 months of their partial smoking ban.? You then see an even sharper distinction in the last three months of 2007 after a full ban came in: a drop in December’s revenues between 2003 and 2007 of….? 22%.???
Of course once you figure in inflation and general industry growth in non-banned states, the real figure is even worse: somewhere on the order of 30%.
The economy and competition may indeed be having some impact on Atlantic City, but it’s the smoking ban, even just the partial ban that discourages gamblers from visiting because there’s no place to relax and chat after a meal with a glass of wine and a cigar or cigarette, that is killing the casinos and the lives, livelihoods, and taxes that are dependent on those casinos.
Atlantic City’s smoking ban will ultimately cost taxpayers not just millions, but literally hundreds of millions of dollars in lost revenue, and you can bet your bottom casino dollar that it won’t be the lawmakers or the antismoking organizations that will pay the bill.
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