Atlantic City’s closed Revel casino spent another week in the dark, but power was restored to the property by the weekend.
Owner Glenn Straub and ACR Energy—the controversial company that owns and operates Revel’s power plant—reached agreement on an interim deal that turned the power back on for two weeks. Straub will pay about $262,000 for the power or up to 2 megawatts of electricity. Key to the deal appears to be an offer by Wells Fargo to pay for power.
ACR shut off power and water to the property April 9 after it was unable to reach a deal with Straub’s Polo North Country Club Inc., which purchased to closed casino for $82 million. Atlantic City has been fining Straub $5,000 a day while the power at the building was off, saying it would be impossible to fight a fire at the casino without water and the building’s fire-suppression system working. No word whether the fine has been withdrawn now that power and water have been restored.
Straub has been trying to subvert using ACR’s energy plant, but has been stopped at several turns.
First Straub parked large diesel-burning generators alongside Revel, but they were never hooked up and were later removed after the New Jersey Department of Environmental Protection objected to their use saying they would not meet clean-air standards.
Then, a judge blocked Polo North from using energy equipment inside Revel which is owned by ACR to restore power and ordered Polo North to give ACR access to periodically inspect the equipment.
That appeared to shutdown Straub’s plan to hook up the casino to the closed Showboat casino’s power grid. Straub is buying the Showboat from Stockton University. Such a move, however, would also require a license from the state.
According to court documents, Wells Fargo—which was the main financer of the property’s bankruptcy—has offered $300,000 to help end the impasse over the power supply. The offer was made in the hopes of alleviating “dangers” from the power and water being off, reports Philadelphia’s NBC10 which obtained the documents. Again, no word whether Straub will accept the money from Wells Fargo to pay ACR.
“Wells Fargo is concerned that the impasse between ACR and Polo North is creating a potentially dangerous situation with respect to the building and its surrounding areas,” the court papers said. “Due to the obvious and imminent public safety issues, time is of the essence.”
Though Wells Fargo had been the casino’s primary lender during its bankruptcy, bank officials acknowledged that it no longer has any connection to the property now that the sale to Straub is finalized. But the company is offering to pay for two weeks of electrical service from proceeds of the $82 million sale.
Wells Fargo’s offer requires ACR to provide two weeks of electricity at the utility’s cost, and for Straub to agree to use that power to re-activate the fire and suppression systems inside Revel as well as make sure an aircraft warning light at the top of the 710-foot-tall building is working and provide perimeter lighting around the property.
Straub has not commented on the offer before or after the ACR deal was reached.
Tenant Leases
In another matter, Bankruptcy Court Judge Gloria Burns ruled again that Revel’s bankrupt corporate parent can shed its leases with tenants at the casino.
The owners of several successful businesses at the casino—such as restaurants and nightclubs—have sued to overturn Burns decision and to protect their investment at the property. Most of the businesses—which were successful even if the casino was not—want to continue to operate under Straub’s ownership.
Burns said Polo North’s obligations to the tenants should be settled either in the appeal, or the parties could choose to forge new agreements,
U.S. Bankruptcy Code entitles the tenants to “quiet enjoyment” of their space. What, precisely, that means, is “subject to applicable non-bankruptcy law and can be dealt with by an applicable court,” Burns said.
Straub has signaled a willingness to work out new lease agreements. Stuart Moskovitz, Straub’s lawyer, told reporters that Straub is not likely to seek new tenants, but he is seeking some undisclosed amendments in the existing leasing contracts to be made.
Burns also approved a settlement agreement on the division of the $82 million in sale proceeds.
Wells Fargo, Revel’s bankruptcy lender, gets most of the money while the casino’s unsecured creditors get $1.75 million. Another $13.5 million is set aside for legal fees and other administrative and $7 million funds professional fees to complete the bankruptcy.
Stockton Purchase
And in a related matter, the president of Stockton University, which is schedule to sell the closed Showboat casino to Straub, announced he will resign later this year.
The announcement by University president Herman Saatkamp comes as the Showboat deal remains mired in legal challenges.
The school had purchased Showboat to use as a satellite campus in the resort, but was blocked when Trump Entertainment invoked an agreement dating to the 80s with the casino’s then owner Caesars Entertainment. The covenant said that Showboat would remain a working casino.
Trump Entertainment objects to the idea of a school next to the Taj Mahal, saying underage students would likely try to gamble and drink at their property.
The school then sold the property to Straub, but included plans to lease back part of the site for a campus. Straub bought the Showboat for $26 million after Stockton bought it for $18 million last December from Caesars.
The 72-year-old Saatkamp said he has been working with the university to plan for his retirement and the transition to a successor for some time now, according to the Associated Press. In a resignation letter he cited “past and present health considerations” as part of his decision.
Saatkamp stopped short of saying the Showboat situation contributed to his decision to step down, but he did address the matter.
“I remain optimistic for the success of the Island Campus in spite of the challenges currently faced,” he wrote. “Few universities have the prospect of building a large campus at low cost in an urban setting that is in great need of stability and opportunity. Even if we do turn away from the Island Campus, I hope Stockton will continue to support its programs in Atlantic City while serving a diverse population and providing educational opportunities, professional development, and economic stability where it is greatly needed.”
Saatkamp’s resignation will become effective after Aug. 31.
