Saturday, January 12, 2008

Revel casino project may hit a snag

Here's a story from The Press of Atlantic City yesterday that shows a possible problem for the Revel casino project. I was pretty excited about this casino after I saw the plans for this casino. It was different for Atlantic City and definitely a place I would check out as I am just dieing for a good poker room with great dealers.

Atlantic City Housing Authority questions financing for $2B. Revel casino

By MAYA RAO Staff Writer, 609-272-7221
Published: Friday, January 11, 2008

ATLANTIC CITY - The head of the Housing Authority raised questions in an interview Friday about whether Revel Entertainment Group has sufficient financing to follow through on its proposal for a $2 billion casino on which construction has just begun in the South Inlet.

Dennis Ricci's remarks followed a controversial decision the authority made at a special meeting Thursday night that will hamper Revel's access to $53 million its financers are holding in escrow until it has a so-called reverter clause stricken from its agreement with the authority. The casino, slated to open in 2010, would be the biggest and most expensive in the resort.

"The question that needs to be asked is why this is undercapitalized," Ricci said. "Everyone knew going in that the reverter was in place. (Revel CEO and Chairman Kevin DeSanctis) knew it was in place. That was their business decision."

The authority maintains that all of its redevelopment agreements have carried such a clause, under which developers must complete construction within a specified period - among other requirements - or the land "reverts" to the Housing Authority. The measure was implemented to hold developers accountable after the resort in decades past saw a slew of failed promises resulting in vacant lots; the authority only removes it from agreements once construction is complete.

An agreement from a previous developer bearing the clause was carried over to Revel in 2006 once the company, backed by Wall Street giant Morgan Stanley, purchased five acres of authority-owned land as part of its 20-acre beachfront site. Revel only recently submitted papers seeking 20 different amendments, one of them a request to drop the reverter clause.

The Housing Authority approved the majority of the amendments sought. And it offered to meet Revel halfway, said Ricci, by agreeing to remove the clause once the company secured permanent financing. So far, Revel is operating on $160 million in interim financing in an effort to start construction quickly even though permanent financing was difficult to obtain because of problems in the credit markets. Revel expects to secure permanent financing in three or four months.

"We will bend over and do something we have never done for anyone else before by taking out the reverter prior to completion," Ricci said.

The unanimous vote has prompted threats and criticism from Revel, which said it was counting on tapping into its $53 million in escrow by the end of the month to proceed with the project. Revel officials met with Mayor Scott Evans in City Hall on Friday to press the issue, and several City Council members are backing an ordinance for next Wednesday's meeting that would eliminate the authority's redevelopment powers.

Escrow money aside, just $68.3 million of Revel's interim financing is allotted for construction improvements; $52 million is going to pay off existing debts, authority documents show.

"That's (the construction improvements) less than 3 percent of project," Ricci said. "That's a very small amount of money."

"The reverter is the only control or remedy the public sector has in case there are any defaults along the way," he added.

Revel attorney Lloyd Levenson raised sharp questions about the Housing Authority's motivations, claiming the authority asked Revel during the course of their negotiations for money in exchange for dropping the clause.

"They know as well as everyone else knows that this is a partnership between Morgan Stanley and Revel, and we have done more in a year than any other developer has done on that site in 40 years," DeSanctis said.

Levenson, who said the company has spent more than $250 million overall on the project - including the cost of the land - also noted that the authority would only have the power to "revert" five acres of land, which would be useless because it is too small for a hotel or casino.

Among the other concessions the authority granted to Revel, according to documents, was extending the term required for completion from three years to four - with the option of extending that term by paying $250,000 for every six-month interval after. The Housing Authority balked at an additional request from Revel to change the period the authority has to approve its permanent financing to just 10 days. The authority is pushing for a 30-day period.

The Housing Authority is also asking Revel to increase its hiring goals for unemployed and under-employed resort residents from 20 to 30 percent, a proposal that Revel rejected, according to Ricci.

City Council passed a resolution Dec. 28 ordering the authority to approve the amendments Revel was seeking, but Ricci claims he did not find out until later and had to call the Clerk's Office for the documents. Evans said he met with Ricci on Friday.

"The city is very concerned about this issue and the city intends to see that everything can be done in an amicable way to see that the Revel project continues without any disruption," Evans said.

The mayor has a seldom-invoked veto power over authority meeting minutes, according to the city code, which says that no action taken by the authority is effective until approved by the mayor or 10 days after a copy of the minutes is delivered to his office.

Evans, who was unaware of that power, said he would consult with the city solicitor on it and that he believed the issue could be resolved within the next few days.

Councilman Tim Mancuso said he thought the authority had acted with good intentions, though some miscommunication may have occurred, and suggested that all parties could sit down without having to "go to war."

State Sen. James Whelan, D-Atlantic, a former resort mayor and frequent critic of the government's interference here with attracting what he believes is much-needed development, had this to say: "Frankly, this is the kind of snag that comes up that developers look at and kind of say geez, what's going on?"

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