New Jersey bet on the wrong casino with Revel

The $2.4 billion Vegas-style resort's planned bankruptcy means skeptics were right when they said it would never score in the city's already troubled gambling market.

By Jonathan Berr Feb 22, 2013 9:45AM
The Revel casino is seen on the Boardwalk Thursday, Feb. 14, 2013, in Atlantic City ( Mel Evans/AP Photo)When the swanky $2.4 billion Revel casino opened in Atlantic City last year, New Jersey Governor Chris Christie hailed it as a "game-changer" for the struggling Jersey Shore resort. That's why the state provided it with $300 million worth of aid. He couldn't have been more wrong about the most expensive casino in the city's history.

The resort, which brags about its ocean-view rooms with flat-screen TVs and marble-tiled bathrooms, tried to bring Las Vegas glitz to the blue-collar Jersey town and failed to attract customers. According to state officials, Revel generated a paltry $8 million in total casino revenue in January, ranking dead last among the city's 11 casinos. That's why the news earlier this week that Revel plans to file Chapter 11 bankruptcy is hardly a shock.

"Revel had amended its revolving line of credit at least three times since the summer, spending money at a fierce clip while bringing in less than half the $30 million a month that Wall Street analysts said it needed to sustain its massive 6.3 million-square-foot operation," according to the Philadelphia Inquirer.

As part of its aid package, New Jersey gave Revel a Redevelopment and Growth tax incentive award of $261 million, which allowed it to receive a rebate of tax revenues over 20 years. No taxpayer funds were provided up front.

The resort has had a rocky history for years. Morgan Stanley (MS) first began developing the project in 2006 but backed out before construction was complete and wrote down its entire $1.25 billion investment. Chief Executive Kevin Desanctis was brought in 2011, but his status with Revel after the bankruptcy remains unclear, according to The Wall Street Journal.

Many critics of the aid, including state Democrats, have argued that the state's oversight of Revel was lax. Bob McDevitt, head of Atlantic City's largest casino union, which has tried to organize Revel's workers, is quoted in the Press of Atlantic City saying, "We warned them this would be a catastrophe, but no one listened. Now, it's a catastrophe."

Revel has a tough road ahead. Increased competition from neighboring states such as Pennsylvania have eroded Atlantic City's business, causing revenue to fall in each of the last six years. Revel clearly didn't help that trend.

--Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
58Comments
Feb 22, 2013 4:56PM
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I left Jersey & new York a few years ago, just got fed up with all the ****, restrictions, taxes, big mouth politicians, who talk a lot but do very little, should have left a long time ago,, don't miss any part of it, maybe the smell a little, (not really) all I can say is New Jersey & New York is a good place to be from, as far as from as possible,,,   
Feb 22, 2013 4:56PM
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ac isn't what it used to be...

i bet tourism is down a lot since casinos have opened in pa, ct, ny and other ne states...

i know i live central pa...about 1 hr from the casino in wb...

i can drive there every day if i want too...

so why would i get on a bus for 4-5 hrs to ac and gamble...

we used to have 4-5 buses from my area going to ac every day.

now it's down to less than that a week!!!!

somebody really needs to have their heads examined of that deal.

Feb 22, 2013 4:55PM
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The big boys lost money !! Makes me want to cry ( not )
Feb 22, 2013 4:53PM
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Name an manufacturing company that NJ would ivest 300 million in.

you cant. 

more welfare for millionaires.

more minimum wage jobs.  So how much did each minimum wage job cost New Jersey taxpayers?
Feb 22, 2013 4:52PM
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You have to change the area the casinos are in or people will not go there. There are to many slums and to much crime until you change that casinos will continue to lose
Feb 22, 2013 4:50PM
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Visited the Trump Taj Mahal 20 years ago when it was "the thing". I could see the boardwalk only going downhill. I was shocked that Merv Griffin's casino liioked like hell.
Feb 22, 2013 4:19PM
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As a casino regular from nearby. I went to Revel shortly after it opened. Putting aside the voids in the building as it was just being furnished, etc..., I was disappointed in the lack of options for gaming. Where were the casino-favorites? It also appeared, to me, that Revel was taking the technology approach vs that of being able to interact with seasoned dealers. Sure, there were games with dealers, but not in the amount you would love to see. I got the same enjoyment as if I were selecting a scratch off ticket at a 7-11. I had the feeling that I was in a 'tourist-trap' disguised as a casino. I am not shocked that the 21-something year-old crowd that Revel seems to be targeting were not able to keep it afloat. It is not enough to hire every available female Asian dealer who applied, skilled or not, to keep me wanting to return .
Feb 22, 2013 4:19PM
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Loved the place.  WILL RETURN !!!
Feb 22, 2013 4:18PM
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Thanks Gov. for spending 300 million dollars of WE THE PEOPLE New Jersey tax money on a scam scheme Casino. What Next? How about hundreds of millions more on a sports stadium? Assisted with WE THE PEOPLE New Jersey tax money? NOT! Governor Christy you sure are different but just as bad as the ones from the past. I want a different Governor THANK YOU. New Jersey tax spending is out of control. New Jersey government is to far into the pockets of it's tax paying citizens. I am sick and tired of the Business practice of government. I want a freeze and cutback on spending for private enterprise. I want accountability and better control of money collected and spent through taxation. New Jersey government should do just that govern. Not bankroll schemes and scam private business ventures. Loans might be one thing and a guarantee to the tax payers a must. The taxes I pay do not have fair or good representation on return. Cut the process of tax and spend like it's the State governments money and venture creditable. It's not. Tax money is the peoples money and should be used for the purpose of the people. Used for all the people not the special interest of certain influential ones and risky ventures.     
Feb 22, 2013 4:03PM
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This goes to show you as well as other states that have it (Ohio) that casinos cannot survive being non smoking. I know a lot of people have never smoked or have stopped but most gamblers smoke like crazy when gambling. Go to any smoking casino in Las Vegas and check out the "non smoking" area. There is no one there. No gambler wants to leave a "hot" machine for a smoke. Most Gamblers want their rooms to smoke in too. This is just the way it is. Allow smoking and you will have a full casino. That is why Ohio casinos are going down the tubes and Indiana and Michigan are raking it in.

I smoke but I always aske my gambling neighbor if smoking bothers them. If so I move or gamble till I have to smoke then move. 

 

Feb 22, 2013 3:59PM
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How can you have a smoke free casino when most gamblers smoke and drink. ,I'm sure that didn't help revenues

they should have there own broawalk taxi go up and down for free. cost you 15 to 20 bucks to get there from ceasars on a ric-shaw

Feb 22, 2013 3:59PM
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Been there a couple of times, it is beautiful but there is no way for them to make  60 million a month ( what I heard) to just break even. Very expensive to drink in the bars and dine. The entire property is also smokefree which eliminates 25 % or more of potential patrons. Tough to make ends meet when you are marketing to less than 75 % of the gambling population. Hopefully, Revel will be able to re-emerge and have isolated smoking areas as do the other casinos and target 100% of the gambling audience.

Feb 22, 2013 3:39PM
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West Virginia all the way north to Connecticut is glutted with casinos, no other way to put it.  But if I had to pick winners here, I'd go with the states which have live horse racing and casinos in the same facility.  What Pennsylvania is doing to New Jersey has been happening to Maryland, courtesy of Delaware, for years.  It's only a matter of time before the Preakness moves from Maryland to Delaware or West Virginia because of the race track/casino facilities.

 

As things stand, the only way shot you have at revitalizing a huge number of struggling casinos is to make all casino winnings 100% tax free and payable in cash on the spot.

Feb 22, 2013 3:25PM
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All I can say is that if nothing else I went from being unemployed for 2 years to working a full year of overtime thanks to this project being built.
Feb 22, 2013 3:13PM
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Revel is a magnificent property. it is experiencing financial difficulties due to a number of factors, none of which relate to the quality of the place, which is exceptional. Many AC casinos have been forced to restructure through bankruptcy filings, including the Trump properties, which at the time owned and operated three casino hotels. All of them are fully operational today. So reports of Revel's demise are grossly premature. The bankruptcy filing is smply a way to get out from under some of the debt so they can have more financial flexibility moving forward. Revel and Borgata represent the "new" Atlantic City...properties that are much more than gaming houses. With all the competition AC faces from surrounding states now, the world class dining, entertainment, retail and spa options offered by these two properties, along with others, this Las Vegas-style model is the only way to differentiate Atlantic City from the convenience gaming venues.
Feb 22, 2013 3:11PM
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More government subsidizing of the rich.  Just sad that all the government gets out of these "investments" is a larger tax base and not that plus the proportional amount of profit associated with the amount that they give these companies.  It's basically free money as the companies would pay the taxes either way. 
Feb 22, 2013 3:07PM
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I'M glad I no longer  live in the most corrupt state in the union. What does it say about a society if it has to rely on gambling for revenue. I must say it's a great business though. You give them your money,and they give you absolultly nothing in return. And Christe - I can't use those words here to describe that piece of worm ridden filth.
Feb 22, 2013 2:55PM
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Great place, great restaurants, unbelievable service. Who came up with an idea of smoke free casino?
Feb 22, 2013 2:47PM
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Wow, Chris Christie wrong! Who could have imagined?

Maybe he can just pull another donut out of his pocket and pretend it's big joke. 
Feb 22, 2013 2:39PM
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The Revel is quite nice.  It is comparable to Vegas casinos.  The problem with the Revel was it was too far north on the Boardwalk.  It was nice to check out, but after visiting, I didn't want to walk that far again or spend money on the pedicabs.
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