The new casino in Atlantic City, Revel, has taken a blow to its completion after the departure of a major source of its funding on Thursday.
According to a recent New York Times article, the financial services firm Morgan Stanley has pulled out of the Revel project that started back in 2007. The Revel Hotel and Casino, which has an estimated price tag of $2 billion – and of which Morgan Stanley has already invested $1.2 billion in – has been plagued since the beginning of construction by the economic downturn and a lack of funding. The project has been stalled since 2009, when its initial financing ran out.
The New York Times doesn’t give a reason for the departure of Morgan Stanley from the project, but makes several astute observations. The article reports that this week, Morgan Stanley officials were supposed to report to the New Jersey Casino Control Commission on its leadership’s personal and financial information for the casino to get a state gaming license. While Morgan Stanley officials did not give a reason for the pullout, the New York Times assumes this was a key reason behind the departure of the financial services firm from the business venture.
Morgan Stanley has filed documentation with the Securities and Exchange Commission that indicates they are looking to sell or auction off the piece of the property and Revel Entertainment is already looking for other investors to finish off the casino. Kevin DeSanctis, CEO of Revel Entertainment, is quoted in the Times article as being “very close” to making a deal with China’s Export/Import Bank for $1 billion. “The key is to ultimately figure out who will end up with that equity piece, whether it’s Revel, Revel with a partner, or someone else,” DeSanctis asserted. “We’ll continue everything we’re doing, working on the financing. My total focus is on getting this project done.”
The possibility for problems with the Casino Control Commission over ownership has affected other casinos in the past in Atlantic City. The Friday edition of the Wall Street Journal reported on the problems of MGM Mirage and its involvement with Pansy Ho, the daughter of Chinese gaming magnate Stanley Ho, and the effects of that relationship on other business dealings. MGM Mirage, which owned 50% of the Borgata Hotel Casino, the home of many of the top poker tournaments in Atlantic City, divested its ownership after New Jersey regulators questioned potential ties to organized crime.
The result of the study by New Jersey gaming officials has had a significant impact on MGM Mirage’s other operations across the United States. The Wall Street Journal reported that Illinois is looking deeper into the MGM Mirage’s business connections in China, which could have an effect on its continued operation of the Grand Victoria Casino, a riverboat outside of Chicago. While Nevada has cleared MGM Mirage through its investigations, Mississippi may reexamine MGM Mirage credentials, as the company operates casinos in Tunica and Biloxi.
According to the New York Times, the Revel was supposed to be the driving force behind a rebirth of gaming in Atlantic City. As the first new hotel and casino to be constructed and opened since the Borgata in 2003, the Revel and its 2,000 new hotel rooms would bring players back to Atlantic City and away from newly opened gaming outlets in the surrounding areas such as Pennsylvania and Delaware. While there is a scheduled completion date of 2011 on the books, the funding for the new gaming outlet may not be there to complete the job.