The sale of Atlantic City’s former Showboat casino is now officially bogged down in court.
Developer Glenn Straub is suing Stockton University over the failed deal to buy the property from the school for $26 million. The suit came as the deal was required to be closed.
Straub wants the original contract for the sale declared void, or the closing date extended so legal issues can be worked out. The suit also asks that Stockton not be able to cancel the sale unilaterally.
Stockton officials responded by saying that the suit shows Straub is not serious about making the purchase and the school will now seek a new buyer for the property.
Stockton originally bought the property from Caesars Entertainment for $18 million to use as a city campus in the resort. Plans called for a combination of a non-casino hotel—which would be run by the university—and classroom and dorm space. Caesars placed a deed restriction on the sale saying the site could not be used as a casino.
However, Trump Entertainment—owners of the neighboring Trump Taj Mahal casino—quickly objected and pointed to a 1988 covenant with Caesars that the site can only be used as a casino. The covenant was meant to protect the casinos in that area of the resort Boardwalk. Trump officials said they did not want underage students living next door to their casino.
With the conflicting restrictions bogging down the school’s plane for the site, the university sought to sell the property to Straub—who also owns the nearby former Revel casino—for $26 million. The deal would have reportedly still allowed Stockton to use some of the site.
Straub placed the money for the sale in escrow and a July 1 closing date was set.
But with Straub filing a lawsuit, that sale is now failed as well and school officials said they will begin the sale process again.
“Given Mr. Straub’s litigious background, it is not surprising he is suing Stockton since it appears as if he has no intention of buying Showboat for the contracted price of $26 million,” Harvey Kesselman, acting university president said in a press statement. “We will pursue the contract’s remedies which include cancellation, and we will actively seek other buyers who want to do what is best for our students, Atlantic City and our region.”
It was not clear, however, if the school is seeking to immediately terminate the contract. Officials declined to clarify the remarks, according to the Associated Press. It’s also unclear how any new buyer could proceed until the issue of the two contradictory restrictions was solved.
Straub’s lawyer, Stuart Moskovitz, told the AP that Stockton has refused to cooperate to salvage the deal.
“It is rather ironic that an individual who refuses to negotiate, refuses to cooperate, refuses to reach an amicable agreement, and would prefer to put his university in financial jeopardy rather than work out a reasonable deal, would call someone trying to resolve the situation litigious,” he said. “It doesn’t look like the university improved anything by replacing the prior president with the current one.”
The school’s former president Herman Saatkamp retired this year after controversy over the deal broke.
Straub’s suit charges that the school was supposed to settle the restrictions issue within 90 days. The school, however, says the agreement states that purchaser is aware of the restriction and agrees to purchase the property “notwithstanding the risks attendant to such matters.”
“From our perspective, the contract speaks for itself,” Kesselman told NorthJersey.com. “We will read the lawsuit and take whatever action is appropriate.”
The school has also filed a claim in the Illinois bankruptcy court where a unit of Caesars Entertainment is having its Chapter 11 case heard, asking the judge to rule on the restrictions, but no ruling has yet been issued.
Straub envisioned the Showboat as part of a $500 million multifaceted Atlantic City redevelopment plan he named The Phoenix Project.
Straub told NorthJersey.com that he still hopes the deal can go through, but cautioned that it was Stockton’s responsibility to deliver clear title to the property.
“I didn’t ask for my money back so the deal still could happen,” Straub said. “They can spend money on legal fees or they can do things the right way.”
