The .4 million sale of the .4 billion Revel casino In Atlantic City to a Florida developer appears dead in the water, meaning the casino’s owners will look for another potential buyer.
Bankruptcy Judge Gloria Burns put a partial nail in the coffin of the sale when she declined to extend the closing date for the deal from February 9. However, she did not rule on Revel’s request to formally terminate the sale and keep a $10 million deposit made by developer Glenn Straub.
Revel notified Straub it was terminating the deal prior to the court hearing “based on Polo North’s numerous breaches of the Asset Purchase Agreement, including Polo North’s failure to close by the outside date of Feb. 9, 2015.”
A ruling on that issue is expected this week.
The deal would have seen the vacant casino tower sold to Straub’s Polo North Country Club for $95.4 million. It’s actually the second potential sale of the property to fall through after Brookfield Asset Management walked away from a $110 million bid for the property late last year.
Revel attorney John Cunningham said the company will likely seek a third potential buyer for the casino.
“We’re ready to move on from Polo North,” he said. “We’re ready to find a new buyer. We have zero confidence in Polo North’s ability to close.”
However, Straub’s attorney, Stuart Moskovitz, said the developer remains willing to close on the deal as soon as other issues involving the sale are settled.
Those issues include a challenge by tenants of the property—which operated successful nightclubs and restaurants at Revel—in Appellate Court seeking protections in the sale. The sale has also been complicated by the court challenge of Revel’s main power supplier, which is seeking payments and has threatened to turn off the power at the building.
Earlier in the week, U.S. District Court Judge Jerome Simandle refused to let the proposed sale go through without taking into account the legal rights of the tenants, which are appealing a previous bankruptcy court ruling that the sale can go forward “free and clear” of their leases.
The judge issued a temporary stay allowing the sale to proceed only if the appellants’ rights were taken into consideration. The tenants are seeking to protect about $16 million in investments in the property.
That left Straub unable to close on a deal, according to his lawyer.
“We were anxious to move forward, and we still are,” Moskovitz said. “We are anxious to close as quickly as possible, but we need to know what we’re closing on.”
If Burns decides to terminate the sale, she said bidders—including Straub—would be free to submit new offers for the casino. That could mean even lower bids for the property could be made.
The Wall Street Journal, citing unnamed sources, said at least two other potential buyers have expressed interest in purchasing Revel. There have also been reports that Hard Rock International had been in talks with Straub about the property.
Moskovitz said that Straub might be interested in submitting a new bid.
“If we can buy this for $40 million instead of $95.4 million, why not?” he told the Associated Press after the hearing.
The AP also recounted a conversation after the hearing between Straub himself and Cunningham, Revel’s attorney.
“Are we investing in Miami and spending $2 billion there?” Straub asked. Then referring to difficulties with the proposed Revel deal, he asked, “Why do we want to deal with $15 million in legal fees, power being shut off? What you guys are doing is affecting a lot of people’s lives.”
Issues surrounding Revel’s power plant have been a thorn in the side of the property since it opened more than two years ago. ACR Energy partners is seeking to collect on unpaid bills as well as the debt for the $118.6 million plant’s construction.
ACR is threatening to cut off utility service to the building unless it is assured it will be paid. Burns is scheduled to rule on whether the utility can shut off the power this week as well.
Issues with ACR were cited as the main reason Brookfield Asset Management walked away from its deal and the expensive arrangement between Revel and ACR was seen as a major factor in the casino going bankrupt.
Finally, if Burns rules that Revel can terminate the deal and keep Straub’s $10 million deposit, it will set off yet another legal battle as Polo North will fight to keep the deposit, Moskovitz said.
“If Revel terminates this contract, it will cost them tens of millions of dollars,” Moskovitz told the AP. “They will never get a bid at these numbers. From Day One, Revel was a disaster, in every way imaginable.”
