Revel's bankrupt, and why it never really had a chance
February 20, 2013By Jen A. Miller for NewsWorks
Revel casino plans to file for chapter 11 bankruptcy next month, This is nearly 10 months after the $2.4 billion casino opened in Atlantic City.
Revel never really had a shot anyway, for two reasons: a declining gaming market and too much debt.
Declining Gaming Market
Revel was a complex conceived in the halcyon days of Atlantic City, when they still had a monopoly on East Coast gaming. MGM said it was going to build a $5.5 billion mega complex. Pinnacle blew up the Sands. In 2006, the year before the Revel project was announced, Atlantic City's casinos scored in $5.2 billion gaming alone. Gaming has declined by eight to nine percent every year since 2005. In 2012, casinos only brought in $2.99 billion - a 42 percent drop from 2006.
Last summer, Revel became *the* place to be if you're in Atlantic City and want to party and the place is absolutely stunning, but in order to sustain operations and meet debt payment requirements, they needed to win a lot in the actual casino, which they did not. Even with the state of Atlantic City gambling, the numbers were shocking. In January, Revel finished 11th in gaming revenues, bringing in less than $8 million.
Too Much Debt
Revel pushed ahead with construction plans despite warning signs that Atlantic City's good luck was fading. In early 2009, construction on the interior of the building stopped, then started again after they got more cash. Then in April 2012, Morgan Stanley pulled out its stake in the project. The extra money came from N.J. state taxpayers and J.P. Morgan. Since opening, Revel has had tax liens filed against them, extended their line of credit multiple times, and there was threat of foreclosure or tax auction. Their total debt: $1.2 billion.
When Revel started to have financing problems in 2009, they had two options: stop construction completely and leave the building empty, or push on. They pushed on and here we are today.
Revel is not going to close. This is a Chapter 11 filing, which means reorganizing debt. If a casino closed every time it declared bankruptcy, we'd no longer have Resorts, Tropicana, Trump Taj Mahal, Trump Plaza (which was recently sold), or the Atlantic City Club (formerly the Hilton). Revel officials say the restructuring should be done by this summer. They're also adding more slots and affordable dining options with the hope of bring in more gamblers, and their money.
After that, who knows? The former Trump Marina has found new success as the Golden Nugget. Resorts has partnered with Mohegan Sun. And, hey, Miss America's back. But be wary anytime you hear the word "game changer" in Atlantic City, as Revel was called by Gov. Chris Christie. So far, nothing's worked.
Jen A. Miller writes the Down the Shore with Jen blog for NewsWorks.org. Jen is author of The Jersey Shore: Atlantic City to Cape May, which is now in its second edition.