Revel: The Casino Nobody Wants
The New Jersey gambling landscape has suffered many hardships lately, and after the case of the Trump Plaza in Atlantic City, Revel is the latest casualty. Officials had their fingers crossed that the bankrupt facility would get purchased at auction this summer, but to no avail. Nobody wanted to buy Revel, and now it's going to close. Not only that: It's going to close a week earlier than expected, leaving over 3,000 out-of-work employees with even less money in their pockets than anticipated.
Instead of closing on September 10, as originally planned, the casino will close on September 2. The hotel will shut its doors one day earlier, at 11 am checkout. All concerts that were scheduled the week before closure have also been called off. Indeed, the situation surrounding Atlantic City's Revel is a bleak one at this time.
A Short History
Revel debuted just two years ago, in April of 2012. It was the gambling town's first new casino since the 9-year-old Borgata opened, and those in the gambling industry had high hopes for its potential to rejuvenate the ailing city's economy. During those two years, casino owners filed for bankruptcy twice: once in early 2013, and again in June of 2014. Revel's earnings never amounted to much at all; it was the worst-performing casino in a city of struggling gambling halls. This summer's failed auction attempt was the building's last chance to establish itself, and employees' last hope of maintaining their jobs there.
Doomed From the Start
Plans for a new facility like Revel often begin years before the building actually opens. The idea for Revel was first announced in 2007, when Revel Entertainment filed plans in conjunction with investor Morgan Stanley for a new 3,800 hotel room resort/casino. Sadly, three Revel Entertainment executives and a builder from Tishman Construction were killed in a 2008 plane crash in Minnesota. The project sallied forth in spite of these obstacles, but by 2009, money was running out, and 400 workers were laid off the project. An executive decision to finish the building's exterior, but put off construction of the interior until more money became available, was made at that time.
Leaving a project half-finished didn't sit well with Morgan Stanley, and in 2010, the company pulled out. The maneuver caused the investment business a loss of over $900 million, but executives still felt it was a better alternative than spending another $1 billion on a dubious project. As it turned out, Morgan Stanley was wise to cut their losses. Revel Entertainment executives still wanted to finish what they started, however, and began searching for a new financial backer.
In 2011, the company decided to scale back their original construction plans, reducing hotel rooms by one third and completely eliminating a second casino tower. Around the same time, New Jersey governor Chris Christie announced that Revel had found the money they needed to finish the four-year-old construction project. Wanting to stimulate the gambling economy in struggling Atlantic City, Christie initiated a government-sponsored program that would flow money to Revel after it reached a certain profitability threshold. Unfortunately, Revel never reached that threshold and was unable to benefit from government stimulus money. A few months later, in September of 2011, one of the building's construction workers was struck by lightning and killed. Things were looking quite ominous for the proposed Revel building and all who were involved with it.
In March of 2012, Revel secured its operating license. It opened the following month. Profits were low from the start, and within seven months, Wall Street had downgraded the company's debt and a state senator referred to the casino's finanical situation as “dire.” Early in 2013, the company filed for bankruptcy in order to shirk a $1 billion debt. In spite of this, the company found itself filing for bankruptcy again in June of 2014. The building went to auction, but nobody wanted to buy it, and now, Revel is set to close.
Losing Out to Pennsylvania
For many years, Atlantic City occupied the number two gambling spot in the US, second only to Las Vegas. In the mid 2000s, however, casinos blossomed in nearby Pennsylvania, stealing many of New Jersey's regular gambling customers. Profits in Atlantic City sank from over $5 billion in 2006 to just over $2 billion in 2013, in large part because of the new competition in Pennsylvania.
Right now, Pennsylvania is home to 12 casinos, including Sheldon Adelson's Bethlehem Sands and the Mohegan Sun at Pocono Downs in the town of Wilkes-Barre. Table gaming became legal four years ago and has taken off with flying colors in the state. All casinos in the Keystone State are monitored by the Pennsylvania Gaming Control Board.
Holding Out Hope: Bankruptcy Court Buyer Still Possible
Even as Revel announced its closure, it made a public announcement on August 14 that it was still in negotiations with potential buyers. Revel's lawyer referred to the unknown entities as “certain potential bidders” but did not elaborate further. A last-minute purchase could be wonderful news for the workers at Revel who now face unemployment. It could also be good news for the sellers of the building, Revel Entertainment's executives.
New Jersey Citizens: Angry About Potential Executive Bonuses
Last month, a judge agreed that Revel executives could receive up to $1.75 million in bonuses upon the sale of the building. Some citizens who watched their taxpayer dollars support the life, and eventual death, of Revel and other Atlantic City casinos are angry about this. The bonuses were referred to as an “incentive plan” by US Bankruptcy Judge Gloria Burns. It appears at this time that the bonuses will probably not come to fruition, but Revel Entertainment still has a small window of time to change that.
Even if a buyer is found at the eleventh hour, Revel executives would only receive bonuses if sales proceeds reach a certain minimal threshold. That threshold has not been revealed to the public.