The New Jersey Casino Control Commission approved the appointment Eric Matejevich as trustee for Atlantic City’s Ocean Resort casino as the New York-based hedge fund Luxor Capital moves to take over the troubled property.
Matejevich is a veteran casino executive in the Atlantic City casino market as a former COO of the Atlantic Club casino and will oversee Luxor’s pending $70 million investment in the property while the company seeks casino licensing in the state.
However, financial information released from the sale show that the Ocean Resort—formerly the Revel casino—is in serious financial trouble again and has been losing money since September.
Luxor is talking over the property from Colorado-based developer Bruce Deifik, who led the group which re-opened the casino in June. Luxor lent Deifik’s investment group $122.5 million when he purchased the casino for a reported $229 million in 2018. The hedge fund has said it plans to invest another $70 million into the property.
In the meantime, Ocean Resort has been facing some serious financial concerns. New Jersey requires the casino to maintain at least $36 million on hand at all times, but that figure has recently fallen below $20 million. The casino has not met the minimum balance requirements since November, Sara Ben-David, a deputy attorney general told the AP.
Reports also show that Ocean Resort has not turned a profit since August. According to the AP, the casino lost $3.2 million in September; $4.1 million in October; $5.5 million in November and $5.8 million in December. Overall, the casino reportedly lost about $23 million since opening in June.
The casino responded to the losses by reducing its cash and reserves and delaying payment on bills, regulators told the wire service.
The New Jersey Division of Gaming Enforcement wrote that the casino’s liquidity levels “are now a serious concern,” in a recent report. The report said the casino cannot currently meet its legal requirement to prove it can meet operating expenses and maintain continuous and stable casino operations.
That raised concerns among commission members.
“This property has clearly had a very challenging past, and I’m very, very concerned about its future,” said commission Vice Chairwoman Alisa Cooper. “I sincerely hope that this arrangement before us today will be successful and enable this property to survive.”
The commission approved a joint petition for a divestiture trust agreement between Deifik, and Luxor Capital Group.
“The proposed divestiture trust represents a unique vehicle through which Luxor, a qualified financial source of Ocean Resort, but not yet a casino licensee or casino licensee applicant, can invest in Ocean Resort to support it maintaining its financial stability,” said commission Chairman James Plousis. “With approval of the divestiture trust agreement and qualification of the trustee, we will not only maintain public confidence and trust in the credibility and integrity of the regulatory apparatus, but will advance the economic stability of Ocean Resort’s casino operations.”
When Deifik acquired the property in January 2018, Luxor Capital and JPMorgan Chase Bank were primary lenders of the reported $229 million price. The financing consisted of two bridge loans: $110 million from JPMorgan Chase and $122.5 million from Luxor. The JPMorgan loan was repaid in June with a second loan of $175 million from the bank, according to the Press of Atlantic City.
According to the petition, $50 million of Luxor’s new $70 million investment will be used to reduce the principal balance owed to JPMorgan. The remaining $20 million will be used to acquire majority ownership interest.
Luxor has also said it plans to finish 12 uncompleted hotel floors at the property, which would add an additional 500 rooms to the existing 1,399, the Press reported.
The troubles of the casino are nothing new for the property, which cost $2.4 billion to build and has never been profitable while operating.
In fact, the only owner of the property to see a profit on the property never actually opened it for operation.
Florida developer Glenn Straub bought the property out of bankruptcy in 2015 for $82 million. Despite a volatile reign over the property which included high-profile battles with state regulators, he never re-opened the casino and sold it to Deifik’s group for a reported $229 million.
In an interview with the AP, Straub would not say how much profit he saw from the sale, but did say he derives no pleasure from “the bath that they took” on the deal.
State officials said that Straub is the only investor in the property who appears to have made money.
“The good news is that Ocean Resort is open for business and will remain open for business and we’re excited about its future,” said David Rebuck, director of the state Division of Gaming Enforcement told the AP. “The bad news is that another investor lost their funds and did not succeed.”
In another story involving the sale of a former casino, the Press reports that a notice of settlement has been filed for the former Atlantic Club Casino Hotel, but the owner of the closed property denies there has been a sale.
The notice, filed Jan. 15, lists the seller as Florida-based TJM Properties and the buyer as Jeffrey Smolinsky, on behalf of North American Acquisitions. A spokesman for TJM told the Press there is no active contract and he was unsure why it was filed. Smolinsky did not return requests for comment.
No sale price was listed in the notice of settlement, the paper reported.
