The Lights Are On At Revel But There Still Won’t Be Anyone Home For Awhile
The tragic saga of the Revel is finally coming to an end, but like a phoenix, the Revel is rising from the ashes. And it appears the first chapter in act two of the Revel Casino’s history is providing us with a few rays of optimism.
Sale finally done
After an extremely long and tumultuous process, the now-shuttered Atlantic City casino has finally been sold to real estate developer Glenn Straub for the sum of $82 million in bankruptcy court – a decent deal for Straub considering the Revel cost roughly $2.4 billion to construct less than five years ago.
That being said, it’s a deal that comes with plenty of risk, considering Revel was hemorrhaging some $25 million per quarter under its previous owners. To turn it around, Straub will need to do much more than simply getting a good purchase price.
Since setting his sights on the property in September of 2014, Straub has detailed some of his potential plans for the property, which range from a sports complex, to a water park, to a “Tower of Geniuses,” but the most likely scenario is the Revel reopens as a hotel and casino, at least in the near term.
The biggest hang-up was electricity
The cost of powering the Revel was one of the biggest reasons for the casino’s struggles under previous ownership (but certainly not the only one), and was a critical factor in keeping interested parties from bidding on the property – even at a bargain basement price.
The initial winning bid in the Revel auction came from Brookfield US Holdings LLC, with a bid of $110 million back in October of 2014. However, Brookfield was unable to broker an agreement with the power plant that supplies Revel with power and the deal was eventually nixed. As Brookfield spokeswoman Melissa Coley told the Press of AC, “Bondholders controlling debt connected to construction of Revel’s plant refuse to rework fixed costs connected to the plant’s construction.”
The power plant, an adventurous initiative that proved to be a foolhardy undertaking, was supposed to be built and operated by Revel, and was supposed to keep Revel’s energy bills down.
That being said, when the costs kept piling up they had to seek outside funding, which is where ACR Energy Partners entered the fold.
ACR finished the construction of the power plant, and now holds a 20-year bond that forces the Revel to pay $1.5 million per month to cover construction costs and interest, and locks them into purchasing their energy from ACR as well – estimated at another $1.25 million per month.
Straub is unlikely to get ACR to cut the bond payments long term, so he is now working on several different solutions to this complicated and costly problem.
One potential solution involves his purchase of the Showboat Casino, which he plans on leasing out to Stockton College, but connecting the Revel to the AC power grid through the Showboat by bypassing the Revel power plant and ACR altogether.
In the meantime, ACR has agreed to a temporary solution, and on April 29 the lights went back on at Revel:
UPDATE: There is now power into the Revel building, future still murky http://t.co/p5Mn1OuFJR via @amysrosenberg pic.twitter.com/kA8CpLKXj0
— Philly.com (@phillydotcom) April 29, 2015
Lights on #acpress pic.twitter.com/FObUTPGh4t
— Reuben Kramer (@ACPressKramer) April 29, 2015
When will Revel reopen?
In addition to how the property will be powered, another unanswered question is when the property will reopen?
Straub went on the record recently, indicating a Memorial Day reopening was unlikely, and many observers think the summer of 2015 is probably a wash as well, perhaps all of 2015.
Straub says Revel won’t reopen by Memorial Day, raises doubt about whether it will be open at all this summer #acpress
— Reuben Kramer (@ACPressKramer) April 28, 2015
“These people just give me so many roadblocks,” Straub told the Press of Atlantic City. One of those roadblocks is of course the power plant.
Another question, noted in the opening, is what purpose will the Revel serve when it reopens?
Is NJ online gambling in the cards for Revel?
One possible new revenue stream Glenn Straub could quickly tap into could present itself if the Revel continues to operate as a casino: online gambling.
Online gaming isn’t going to be the savior of the property, but an additional $500k-$1 million in revenue per month could go a long way in paying down those hefty electric bills.
There are a couple of ways Revel could jump into the legal NJ online casino waters.
First, Revel could partner with an iGaming provider. This is the more cost intensive option, and with most of the appealing partners already spoken for, this may be a route the Revel chooses to avoid.
The second option would likely bring in less revenue, but also provides little risk.
Revel could simply allow up to four iGaming providers to operate an online gaming site under the Revel’s license, much like Betfair operates under the Golden Nugget license, or the way Pala Interactive operates under the Borgata NJ casino license.
Image Aneese / Shutterstock.com