Revel says it will close by Sept. 10

Eric Pratali and his family hunt for sea shells in the shadow of the Revel Casino Hotel, which said Tuesday it will close by Sept. 10.
Eric Pratali and his family hunt for sea shells in the shadow of the Revel Casino Hotel, which said Tuesday it will close by Sept. 10. (ED HILLE / Staff Photographer)
Posted: August 14, 2014

ATLANTIC CITY - Amid the backdrop of a resort that has lost its dominance, the lavish but beleaguered Revel Casino Hotel announced Tuesday that it will close by Sept. 10, leaving the city agonizing over what to do with nearly 6,400 more workers slated to lose their jobs by fall, and its future.

Revel's closure will make four empty gambling halls along the famed Boardwalk after Trump Plaza also shutters in mid-September and leaves the city with eight operating casinos.

Revel's closing will put about 3,200 employees out of work, adding to the thousands who have already lost their jobs or will lose them at Showboat and Trump Plaza. The Atlantic Club closed in January.

Revel had been aiming for a bankruptcy auction, scheduled for last week at a Manhattan law firm, but that auction had been delayed a week. On Tuesday, in announcing the casino's closing, the company said: "Challenges have arisen in our attempts to sell Revel."

"It's troubling," said State Sen. Jim Whelan (D., Atlantic) of Revel's failure to land a buyer. "It lays out the deep challenges ahead of us. Bad news after bad news is never good when you're trying to attract visitors and conventions."

Amid the resort city's turmoil, Joe Lupo, senior vice president of operations at market-leading Borgata, which sits in the city's Marina District, said late Tuesday that the city could rebound but needed a lot of support.

"Atlantic City needs the continued attention, focus, and assistance from the CRDA (Casino Reinvestment Development Authority), Atlantic City Alliance, and the new administration to increase awareness of our offerings and drive visitation to the city through world-class events," he said. "These efforts simply need continued strong support."

State Assemblyman Chris A. Brown (R., Atlantic), added: "We must remain optimistic. . . . The state needs to bring stability back to the Atlantic City market by re-affirming its commitment to giving Atlantic City the time it needs to transition into a destination resort and reassuring investors there is a profitable future in Atlantic City."

A report on Monday said Revel did not receive a qualifying bid, a factor that almost surely led to the decision to close. Assuring its demise is the struggling Atlantic City gaming market that has lost nearly half its gaming revenue to surrounding states since 2006.

"We regret the impact this decision has on our Revel employees who have worked so hard to maximize the potential of the property," the ownership group, Revel Entertainment Group L.L.C., said in a statement.

"Despite the effort to improve the financial performance of Revel, it has not proven to be enough to put the property on a stable financial footing."

The statement said the group still hoped to sell the Revel "in some form, through the pending bankruptcy process," but added it "cannot avoid an orderly wind-down of the business at this time."

Revel, which cost $2.4 billion to build and had its construction halted during the worst of the recession, is the fourth Atlantic City casino to close or face closure this year.

Revel declared bankruptcy for a second time June 19, after barely marking its second anniversary.

The casino was never able to generate enough income to maintain its massive operations. This trend continued, despite trimming nearly $1.5 billion from its debt load in a debt-for-equity swap among Revel investors after emerging from its first bankruptcy in early 2013.

Gaming analysts said Revel failed to increase the gambling market in Atlantic City and instead cannibalized the existing market, to the detriment of smaller, weaker performers. One of them, Trump Plaza, is scheduled to close Sept. 16.

Although profitable, the Showboat also has announced its plans to close Aug. 31 if it does not find a buyer by then.

Revel, which straddles the northern end of the Boardwalk, was built with the aid of $261 million from the state, money that was to be repaid once the casino reached profitability. Gov. Christie declared the casino "a turning point for Atlantic City" shortly before it opened April 2, 2012.

The governor, who could not be reached for comment on Tuesday, had remained supportive of Revel after it emerged from its first bankruptcy. But the casino never gained traction or found a customer base.

It also never made a profit. Revel, despite showing a 23.1 percent increase year-to-date this year in gambling revenue compared with the same period in 2013, consistently finished near the bottom among 11 casinos, according to figures from the New Jersey Division of Gaming Enforcement. It finished second to last in June with $11.3 million from slots and table games. The Borgata generated $48.1 million. Only Trump Plaza had a worse showing than Revel, at $4.7 million, for the month.

Many said the expansive casino overreached and narrowly targeted an affluent clientele from New York that already belonged to the rival Borgata, after which Revel modeled itself.

Andrew Zarnett, a gaming analyst with Deutsche Bank AG, was one of the few industry experts who warned that Revel would feed off the existing Atlantic City gambling market, instead of increasing it. "It should have never been built," he said in a recent interview. "Revel grew [gaming] supply while gambling revenue has been cut nearly in half since 2006."

Some experts said Revel suffered from not having its casino on the ground floor, prohibiting smoking when it first opened, not having a buffet, offering only expensive restaurants, and from sheer size. On most days, large swaths of the 6.3 million-square-foot casino resort - including a luxurious mall - sit empty.

Hospitality and tourism experts, as well as developers such as Carl Dranoff, had suggested the 1,400-room hotel could be converted into luxury condos or apartments, but the massive public spaces and cost to maintain Revel was probably a detriment to potential buyers, say some.

The collapse of Revel, which stands at 57 floors and is made of steel and blue glass and shaped like a giant wave, has come to symbolize the faded fortunes of Atlantic City, which just two years ago was still the No. 2 gaming market in the country, second only to Las Vegas. That distinction now belongs to Pennsylvania, with its dozen casinos.

Atlantic City Mayor Don Guardian said last month that he hoped Revel would remain a casino. He said the city had cut the casino's property taxes by more than a third, to $30 million, this year, in hopes of attracting buyers.

"We are disappointed in the decision that the board of Revel has made as there appeared to be several bidders for the property," Guardian said in a statement on Tuesday. "While I am not privy to the current facts that led to this decision, I do know this process is a complex one compounded by an extremely short time frame and cash-flow challenges. This might be Revel's last chapter, but not the last one for this building."

The mayor said his administration remains committed to helping out "the workers, businesses, and visitors who are impacted by today's news."

The nearly 3,200 Revel employees will join 2,100 workers at Showboat and about 1,100 at Trump Plaza who will lose their jobs. The total - 8,100, including the Atlantic Club's 1,700 layoffs in January - represents a fourth of A.C's current casino workforce. Bob McDevitt, president of Unite Here Local 54, which represents most casino workers, declined to comment on Revel's closing.

Some Atlantic County lawmakers held out faint hope that the three impending closures could be averted and that the resort would get to finish out Christie's five-year revitalization plan. The plan was put in place in 2011 and intended to resuscitate the city with a state-run tourism district and added marketing dollars. It expires in February 2016.

Brown, the state assemblyman, suggested the casino closures should not be used to further North Jersey lawmakers' push for their own casino. Lawmakers including State Sen. Ray Lesniak (D., Union) have said a casino at the Meadowlands Sports Complex in East Rutherford, taxed at a much higher rate than Atlantic City's casinos, could earmark and send up to 50 percent of its revenue to the struggling resort.

Christie and Senate President Steve Sweeney acknowledged publicly last month that they are now "open to discussing" a referendum on the November 2015 ballot that would ask voters to decide whether to end Atlantic City's 36-year state monopoly on gambling.

Just hours after Revel announced its closing, the Meadowlands Regional Chamber issued a news release announcing a review of a "vision plan" for the Meadowlands complex "in light of a North Jersey casino referendum."

"In the short term, the proposed casino closing should bring some stability to the remaining Atlantic City casinos," said gaming analyst John Kempf of RBC Capital Markets L.L.C. "However, the reduction of casino tax revenues, along with new casino supply in New York, makes a North Jersey casino more likely in our view."

The mood inside Revel Tuesday night was somber and quiet, though music blared over a mostly empty gaming floor.

"This has been looming for some time," said Chuck Urban, 51, a waiter in one of the casino's subcontracted restaurants. "It's not a pleasant atmosphere right now."


sparmley@phillynews.com

856-779-3928 @SuzParmley

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