On Friday, the $2.2 billion Revel Casino in Atlantic City was back in bankruptcy court for the second time in 2 years. Lawyers for the mega-casino argued it was a “melting ice-cube” that would have to close this summer unless a buyer was found. The casino has been troubled since it opened in 2012.
The long-stalled project was only completed after New Jersey Gov. Chris Christie invested $260 million in tax rebates to help jump-start the failing project. It was part of a government-directed plan to “revitalize” Atlantic City. Now, it appears Christie’s bet is bust.
Plans for the Revel mega-casino began at the height of the financial bubble. Construction of the $2 billion casino, with backing from Morgan Stanley, was announced in August 2007. The ambitious project immediately hit roadblocks after the financial meltdown and recession. As the credit markets dried up and the economic downturn cast doubt on the gaming industry, backers of Revel scrambled to secure funding for construction. The project came close to securing a $1 billion loan from the Export-Import Bank of China, but the talks ultimately broke down.
Within months of the failure to secure a loan from China, Morgan Stanley, the original backer of the project, pulled out of the deal in April 2010. It wrote off its $1.2 billion investment in Revel and eventually sold its stake in the casino for just $30 million.
In late January 2011, Revel and its advisor J.P. Morgan, proposed a three-loan, $1.5 billion package that would allow construction on the project to be completed. A week later, Gov. Christie announced $260 million in tax breaks over 20 years to aid the casino.
The New Jersey Economic Development Authority quickly approved Christie’s plan for state support. One month later, the Revel Casino secured the $1.5 billion in funding it needed to complete the casino resort.
The casino finally opened in April, 2012. The company’s high debt and the lackluster economy spelled immediate trouble for Revel. Gaming revenue at the area’s only non-smoking casino was far below the average in Atlantic City. Its gaming revenues ranked 9th out of 11 casinos in the resort town.
In late 2013, the New Jersey pension board invested $300 million into Chatham Investments, a hedge fund with a 28% stake in the Revel. State officials assured the pension board that the investment wouldn’t be impacted by the struggling casino.