A sale of Revel Atlantic City has been approved again. The question is whether it will stick this time.
A bankruptcy judge has approved the sale of the $2.4 billion casino property to Florida developer Glenn Straub for just $82 million. Straub also announced that he has purchased the Showboat from Stockton University for $26 million, which had bought the building from Caesars Entertainment for $18 million to use as a satellite campus for the college.
But two weeks ago, Trump Taj Mahal owner Carl Icahn invoked a clause in a 1988 agreement by the three uptown casinos at that time, Resorts, Trump Taj and Showboat, that all were to be operated as first-class casinos, even if sold. Icahn objected to the use of Showboat as a university and not a casino, fearing, he says, that the Taj would become a magnet for underage gamblers. It’s unclear how Straub’s purchase of Showboat clears up that issue.
Trump Entertainment CEO Robert Griffin was adamant.
“We will not allow it,” Griffin said.
The deal to buy Showboat includes an 18-month option for Stockton to buy the property back should the Trump opposition disappear.
“I am assured by counsel and others that we are on very firm ground should there be any legal challenges by any casinos regarding the 1988 covenant,” Stockton president Herman Saatkamp said.
Judge Gloria Burns had previously approved another sale of Revel to Straub for $95.4 million, but that sale was made with her ruling that Straub could buy the property without considering the leases of tenants at the property. Those tenants—which operated successful restaurants and nightclubs at Revel and invested $16 million in improvements to the site—appealed that sale order to federal court.
A federal appeals court judge then blocked the previous sale until the appeal played out, but left room for the sale to go forward if the tenants concerns were addressed.
Burns approved this second deal after Straub’s Polo North Country Club—the purchasing company—agreed to drop the provision that sale go through “free and clear of encumbrances” like the tenants’ leases.
Burns said the issue of whether tenants can remain there should be worked out with Straub in a different court, but not bankruptcy court.
Burns also ruled on the sale despite the emergence of at least 18 other entities that said they were interested in the property and hoped the judge would call for a new auction on the property.
But Revel officials urged the judge to approve the new deal saying that none of the other interested parties had made an actual, qualified offer on the property. In contrast, Straub has already put his $82 million in escrow.
Wells Fargo, which has financed the bankruptcy to the tune of $64 million, also wanted the sale to proceed and finally end the property’s long bankruptcy saga.
Attorney Thomas Kreller told the judge the case has been marred by “empty, false promises to persuade your honor there’s light at the end of the tunnel. Your honor: There isn’t a tunnel. It’s a hole. It gets deeper, and there is no light.”
Straub said he too wanted the deal to move forward.
“We have to get started,” Straub said. “I can’t afford to sit on $150 million.”
The $150 million is what Straub plans to invest in the building to have it open by summer.
One of the other potential buyers for the casino was a group led by Howard Milstein of New York and Carl Goldberg of New Jersey that offered $88 million, but also acknowledged they were unable to reach a deal for energy services with the power plant that is Revel’s sole source of heat, air conditioning, water and electricity.
That energy provider is ACR energy, which controls the power plant that was built solely to supply Revel. ACR has been seen as a major obstacle in the sale as the company continues to seek back energy payments and the cost of the plant’s construction.
Straub clearly also has to deal with the ACR situation. He has said he wants to find a new energy supplier for the property, but ACR and its court challenges aren’t likely to go away. And it’s not at all clear if ACR will continue to supply the site power after a deal is closed.
Straub also has to settle with the tenants, who he had previously wanted to evict despite that fact that some of the leases don’t expire for more than a decade.
Straub has proposed a vast array of uses for the property, including a scaled-down casino, hotel, condos, a water park and a “genius academy” think tank to tackle society’s biggest problems.
Once the sale was approved, however, Straub began outlining much bigger plans he has in the city to reporters.
Straub told the Associated Press after the hearing that he has reached a deal to buy several casinos or former casinos in Atlantic City as part of a $500 million overall plan. The only announced purchase was the Showboat.
Straub calls the $500 million plan the “Phoenix Project.”
“As the name of the project signals, the Phoenix rises out of the ashes to be reborn and will evolve to include diversified collection of projects including eight parts designed to show that the American dream is still alive and well,” Straub said.
Straub is also eyeing a recent RFP for the city’s former airport, Bader Field. He pledges to invest $500 million with a project that will include an extreme sports complex, two marinas, a world-class equestrian complex, waterparks, universities and high-speed ferries and helicopter service connecting to Manhattan.
