Atlantic City’s Revel Casino Hotel filed for bankruptcy on Thursday, the second time the troubled property has sought protection from creditors since it opened in April 2012. Despite a massive debt restructuring in March 2013, Revel says it has continued to bleed red ink, losing nearly $22m in the first quarter of 2014. Revel’s management said the announcement came following “an extensive strategic review” that basically involved opening up the cupboards and finding them bare.
Thanks to a $125m loan from one of Revel’s existing lenders, Revel will continue to operate through the bankruptcy proceedings. However, in a letter to employees viewed by the Associated Press, management warned that it could shut down permanently unless a deep-pocketed hero rides to its rescue. A shutdown, which could come as early as August 18, would throw over 1,700 full-time and 1,000 part-time employees out of work.
Since its genesis, Revel has been dealing with a curse worthy of Tutankhamen. Conceived prior to the global financial meltdown and before anyone realized Atlantic City’s gaming revenue swoon was permanent, Revel was dealt a blow in 2010 when Morgan Stanley wrote off $932m rather than invest another penny to see the project through to completion. When the property finally opened with a strict smoke-free policy, gamblers gave Revel a wide berth, leading to the first bankruptcy filing after less than a year in business.
The question now becomes: who would be daft enough to acquire a white elephant with a remarkable capacity to make money disappear? Prior to Thursday’s announcement, names like Hard Rock International and Caesars Entertainment had been cited as potential Revel suitors. Last month, Hard Rock president James Allen clarified that a deal was only possible “if the price is right.”
In April, local casino union Unite Here! suggested Revel wasn’t likely to turn a profit until 2024, leaving its current valuation at less than $100m. Other estimates have ranged up to $300m, which, considering Revel cost $2.4b to build, still sounds like quite the bargain. But as Deutsche Bank Securities analyst Drew Goldman mused at last month’s East Coast Gaming Conference, “just because something was really expensive doesn’t mean it’s still valuable at a fraction of what it cost.”
A buyer will also have to contend with the fact that more competition is headed Atlantic City’s way. Multiple resort-casinos are being planned in New York State and a new Fairleigh Dickinson University PublicMind poll revealed that 12% of New Jersey residents would choose to cross the border rather than gamble in AC. While 57% of New Jersey gamblers said they’d stick with AC, a 12% cut in the already razor-thin margins in AC casinos would not go unnoticed.