The $2.2 billion dollar Revel Casino was the most ambitious project in the history of Atlantic City. After a nearly 6 year saga of construction halts, union protests, government assistance, and other drama, it opened to great fanfare in May 2012.It was supposed to revitalize the city and provide a resort like alternative to smoky, windowless casinos. It never delivered on that promise. It has yet to turn a profit and has been at or near the bottom of casino revenue in Atlantic City the whole time.
Now, less than a year after opening, Revel announced yesterday that it had entered a pre-arranged bankruptcy plan with its creditors, and that it will seek Chapter 11 protection in the coming weeks.
The $2.2 billion dollar project started a half decade ago, when Morgan Stanley approached casino veteran Kevin DeSanctis, who is now Revel CEO.
The casino nearly didn't happen. Construction began in February of 2008, just a few months before the economy began to collapse.
Casinos in particular were ravaged by the recession. From 2007 to 2011, gaming revenue declined by an average of 8.62 per cent.
Governor Chris Christie and the State of New Jersey came to the rescue, and with the help of a $261 million dollar tax credit and new loans, the casino moved forward.
The idea behind the casino was to attract people looking to stay the night and do things other than gamble by fully taking advantage of the waterfront and beach.
Backers hoped that extensive outdoor spaces would attract those looking for a resort experience, in addition to a gambling clientele.
They accounted for winter months with a heated indoor-outdoor pool, open 12 months a year. They hoped that overnight guests would make for a whole new business model.
Big time restaurants from Iron Chefs Marc Forgione and Jose Garces were supposed to add to the appeal.
But there were already signs of trouble on the horizon. The company had a massive $1.1 billion dollar debt load from the start.
Analysts worried that the gaming market was already soft, that there was too much competition, and that owners were over optimistic about their hybrid resort/casino.
Still, the casino opened in April 2012 to massive fanfare, high hopes, and three concerts from Beyoncé.
Wall Street said it needed about $30 million in gaming revenue a month just to sustain the massive operation.
In comparison, the 8-year-old Borgata, opened at half the cost, and brought in $54 million over the same period.
Things failed to improve. Last month, Revel brought in $8 million. That's the second worst total among Atlantic City's 12 major casinos.
Atlantic City's casinos and restaurants were relatively unhurt by Hurricane Sandy, but media gave the impression that it was much worse, and tourists have stayed away.
The most expensive casino in New Jersey history has been at or near the bottom of gaming revenue every month since its opening.
Just to keep the 6.3 million square foot space running, they've had to amend their line of credit three times.
A $150-million cash infusion in December was supposed to keep things going through 2013 and pay for investments designed for a wider clientele.
In a managed bankruptcy, the casino won't shut down or cease operations, while investors will exchange a billion dollars in debt for equity.
Still, with its appeal as a resort destination unclear, and near bottom casino revenues, it's unclear how long Revel can last.
It will need a certain amount of revenue to get any sort of financing, and will have to make a case that it sees growth coming in the future.
Casinos have opened up and down the northern seaboard, including nearby Philadelphia, meaning Atlantic City isn't the destination it once was.
Revel tried a model of involving non-gambling activities that worked in Las Vegas, but alienated the existing gambling clientele.
It took an enormous amount of debt and state help just to open, and investor bailouts to survive. It needs bankruptcy protection just to stay open.
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