SNAKE EYES: Revel CEO Kevin DeSanctis burned through $2.5 billion from Wall Street and political goodwill from New Jersey Gov. Chris Christie, who went to bat for the troubled casino. (
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Last May, when the Revel casino opened in Atlantic City, the traffic light out front was reset on a four-minute cycle — in anticipation of epic traffic jams, one taxi driver says.
Today, that cabby turns off his engine at the light to save gas. He’s one of only a handful of cars waiting.
Revel was suppose to be a new kind of casino — no low-cost buffets, no smoking and a casino on a different floor than reception, with windows that looked on to the best Atlantic City beach, so gamblers did not lose track of place and time. It would be a resort that happened to have gambling.
Instead, it’s the casino that took Wall Street for $2.5 billion. On Tuesday, Revel reached a debt-restructuring deal in preparation for a March bankruptcy filing.
This tale of fool’s gold begins in the mid-1990s.
Morgan Stanley bought some AC land for $70 million to develop and chose Kevin DeSanctis to plan the casino.
It seemed a logical choice.
DeSanctis had started his career as a state trooper on the New Jersey Turnpike, then ended up as a gaming enforcer. The 61-year-old then joined the casino industry, rising through the ranks — running the Trump Plaza and serving as a Mirage executive (working closely with Steve Wynn) — and later becoming chief operating officer of Penn National Gaming.
“Kevin learned a lot of the industry from Wynn,” said Roger Gros, publisher of Global Gaming, which covers the industry.
At the time, there was a belief that typical Northeast gamblers were going to casinos closer to their homes, and the key to the future was to become a regional destination, Gros said.
But as Morgan Stanley was investing $1.25 billion to build Revel, hard times hit the Jersey Shore and Atlantic City gaming revenues cratered, from $5.1 billion in 2006 to $3.1 billion three years later.
Morgan Stanley wound up pulling the plug, cutting its losses when construction was only 60 percent done. Needing funding, DeSanctis went to his former boss Wynn, but Wynn did not see how the project could work, Gros said.
A Wynn spokesman did not return calls. A Revel spokesperson denies that a meeting about Wynn participating in Revel took place.
Gros said DeSanctis is intense, and motivates not like a cheerleader but like a police captain.
He was able to get Gov. Chris Christie behind the unfinished project to get it done without using public funds.
“I think Christie played a huge role in this,” Gros said.
A spokesman for Christie said, “The governor’s contact was limited and was not to lobby investors but provide assurances about the state’s economic incentives.”
With Christie’s endorsement, DeSanctis was able to line up 15 to 20 hedge funds, including Canyon Capital, Chatham Asset Management and Capital Research and Management, in 2011 to invest $1.2 billion to finish construction, and the new investors got a lien against the whole property. Revel finally open its doors in May 2012.
Problems quickly emerged.
The Army Corps of Engineers did not finish work on the adjoining beach, making the casino pool overcrowded. Revel’s four-floor nightclub had only one working elevator.
Gamblers, too, stayed away.
The hedge funds — which had invested more than $1.2 billion for the building to operate the Revel AC — were not seeing enough revenue from the 1,399-room resort.
In December, the group was asked to pony up another $150 million, even though the end was clearly near. Revel’s gaming revenue last month hit a new low of only $8 million.
“While Kevin was focused on a different customer, he was neglecting the 45- to 65-year-old woman who plays slots,” a source with direct knowledge of Revel’s plans said.
That will no longer be the case.
Revel is revamping its operations, opening a high-end slot lounge and offering free slot play.
There will now be a reasonably priced restaurant, and a designated smoking area, the source said.
Most important, Revel’s creditors — when the company emerges from bankruptcy in May — will greatly reduce DeSanctis’s role, most likely replacing him as chief executive, the source said.
In fact, the creditors are already in early-stage talks with Apollo Management’s Caesar’s Entertainment, Marc Lasry’s Avenue Capital and Carl Icahn about selling control of Revel, the source said. The plan is to sell Revel to an existing Atlantic City casino owner within six months who can offer their customers points for also going to Revel.
Revel’s creditors believe they can attract $700 million, the source said. But Gros thinks Revel is worth only $350 million, based on speculation that the similar Cosmopolitan Hotel in Las Vegas received a top offer of only $500 million.
Also, the Meruelo Group last week bought the Trump Plaza AC casino for only $20 million.
Revel insiders, despite their price expectations, do not believe the casino can break even this year after eliminating its debt through bankruptcy, the source said.