Florida developer Glenn Straub now officially owns Atlantic City’s Revel Casino
Whether or not the closed, $2.4 billion casino tower will have electrical power is another story.
Just two days after Straub closed on the bankrupt casino for $82 million, the site’s sole energy provider—ACR Energy Partners—began shutting down power to the building. The building was reportedly without power and water by early afternoon Thursday, April 9.
The move highlighted the long-running battle between ACR—which controls a power plant built solely for Revel—and potential buyers of the casino. The high cost of power for the building and the high construction debt for the plant have been a stumbling block in several previous potential sales of Revel and is seen as a major reason the casino went bankrupt and closed in the first place.
Straub has not said how he intends to deal with ACR’s claims against the casino. And that, apparently led to the power company’s move.
Timothy Lowry, a lawyer for ACR, said the company was forced to cut off the service.
“This is the last thing we want,” Timothy Lowry, a lawyer for ACR, told the Associated Press. “But this guy … I don’t know what to believe. He wants us to provide free power. Glenn Straub doesn’t want to pay anything. He bought Showboat and he thinks he’s going to be sending sea turtles down the Boardwalk with electrical cords.”
Straub also bought the adjacent Showboat casino in a flurry of moves he says is a precursor to a $500 million plan he has for Atlantic City. Straub has said he expects to connect Revel to the Showboat’s electrical grid.
Showboat also has its own power plant, but the hookup with Revel would take two weeks, Straub has said.
Straub also clearly does not intend to bend to ACR’s actions. He told the AP he is looking for portable generator trucks to power the complex and a security firm is already patrolling the property.
Tara Lordi, who manages Straub’s distressed asset portfolio, told NJ.com shortly after the power was turned off that Straub’s company has ordered generators to provide power to the site, but they too would need about two weeks to be installed.
“This is not where we should be putting our time,” Lordi said. “This is ridiculous.”
Straub has acknowledged that there would be problems if the power is cut.
“Batteries for the emergency exits last about three hours,” Straub told the AP. “After that, they better get their check book out and pray there’s not another Chicago fire. The Fire Department’s hook and ladder won’t go up that high. To try to blackmail what we are starting for the season in May isn’t fair. This type of tactic is why 4,000 people lost their jobs.”
Another problem for Straub is a $5,000 daily fine imposed by the city for failing to have electricity on at the property to power its fire suppression systems.
After the power was cut Straub said “We will never give in to blackmail. Let them dig their own grave, along with endangering other peoples’ lives.”
However, without power and water the building’s fire suppression system will not work, water pipes could burst and without working air handling systems, mold could damage the tower’s interior.
The Atlantic City Fire Department said they are monitoring the situation, but fire officials have previously said that if a fire broke out in the 47-story tower it would be nearly impossible to fight without water in the building.
“With the fire suppression system down, we can’t fight a fire in this building safely,” acting Fire Chief Vincent Granese said.
ACR has been trying to collect on unpaid power bills and the debt remaining from the construction of the $160 million power plant.
Both sides said they have been negotiating for months over what Straub would pay for continued utility service through ACR.
Officials for ACR have said they want to negotiate a deal for electrical services covering the next two weeks. Straub told the AP that the company offered him a short-term, two week deal for $250,000, which he termed “way over their cost.” ACR did not reveal details of the offer.
But Straub also told the Press of Atlantic City that he offered to pay $300,000 for two weeks’ worth of power.
“Now they’re trying to blackmail us into signing a 20-year agreement for some $300 million,” he told the paper. “He who throws the first rock suffers the most consequences.”
Straub’s Plans
Another sticking point in the sale has been the claims of tenants at the former casino that operated successful business including a nightclub and restaurants. Though the casino failed, those businesses—including the Jose Garces restaurants and the HQ Nightclub—were turning profits and have fought to protect their rights through federal court.
Their lawsuit initially blocked Straub’s purchase, but new deal recognizes the tenant’s calms. Straub told reporters last week that the problems with the tenants were “all wrapped up” and they may reopen in mid-May
“I told them they should not come in until I have an attraction, which is a casino, or a strip mall, or an outlet mall,” he said. “But they’re saying they have enough following, they want to open up.”
Prior to the showdown with ACR, Straub had been very optimistic after closing on Revel.
His $82 million purchase—through his Polo North Country Club Inc.—ended a long, drawn-out fight for control of the power that saw as several other potential deals for the property fall apart—including a previous attempt by Straub to buy the property for $95.6 million.
Straub says he now intends to invest $150 million in the property. Plans call for a casino to reopen at the property, he said.
Straub said he was in talks with private companies to operate the casino and said he has made a $100,000 deposit at the New Jersey Division of Gaming Enforcement to start the licensing process.
Straub—who hasn’t always offered specific details about his other plans for the site—also talked of opening a water park at the site and said he has plans to build a second tower that will hold a university where “we’re going to cure a few world problems.”
The plans are part of a larger $500 million plan—called the Phoenix Plan—for investment he has in the resort. That plan began to take more shape after the surprise announcement that he had also bought the closed Showboat casino from Stockton University for $26 million.
Straub plans to lease part of the Showboat site back to the school for use as a city campus. The university had planned to convert the casino into a combination hotel and campus, but was derailed when Trump Entertainment—which owns the neighboring Trump Taj Mahal—enforced a covenant between the properties that Showboat only be used as a casino.
That issue still has to be worked out. The sale agreement included a provision the university an 18-month right to buy the building back or lease it for educational purposes. It also included a 90-day escape clause, allowing the university “to continue with its plans to open a residential campus in Atlantic City beginning in the fall of 2015 while evaluating any possible legal challenges from Trump Entertainment,” according to the AP.
But Straub clearly expects all of his plans to come together and promised to focus on Atlantic City for the next few years.
“I think everybody else will see what we’re going to spend here and they are going to spend five times more than what we’re going to spend,” Straub said at a recent press tour of the Revel site. “We can’t do it alone. $500 million is not enough.”
Straub’s plans also call for the redevelopment of Atlantic City’s former municipal airport Bader Field—which the city has long been trying to develop—and the construction of an extreme sports complex, two marinas capable of hosting “super yachts,” an equestrian facility, waterparks and two universities, as well as high-speed ferries and helicopters between Atlantic City and Manhattan. The project also includes a medical complex, independent living facilities and an entertainment hub.
Finally, Straub has reportedly also expressed interest in buying the closed, 250-acre Atlantic City Racecourse in nearby Hamilton Township, New Jersey. Straub says he may build a 1,000-horse stable at the site.
