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McClatchy-Tribune  08/19/2014 2:03 AM ET
Revel: Right idea at wrong time and place, say many [The Philadelphia Inquirer :: ]

Aug. 19--ATLANTIC CITY -- Revel's waning days stand in stark contrast to just over three years ago, when its chief executive at the time, Kevin DeSanctis, wowed everyone at the East Coast Gaming Congress with his vision.

Four months before, in early February 2011, Revel had secured $1.15 billion in new financing to finish construction, which had been halted for more than a year by the recession and frozen lending.

In April 2010, Morgan Stanley, Revel's original chief financial backer and operator, had decided to pull out of the project, taking a $932 million loss on it, rather than spending the $1 billion that finishing the casino would cost. The bank's withdrawal set off a scramble for new financing that included Gov. Christie's getting involved.

The state of New Jersey, thanks to Christie, kicked in a critical final piece -- $261 million in financing to ensure Revel would get built.

Then on May 24, 2011, DeSanctis captivated industry leaders, regulators, consultants, and journalists in the Atlantic City Convention Center with a video. The room watched in rapt silence as computer renderings of the gleaming, 57-floor casino draped in steel and blue glass flashed on the giant screen.

"Atlantic City has the most potential, in my view, of any market in the Northeast," DeSanctis said. Images of Revel's planned features rolled, including two theaters, a dozen celebrity-chef restaurants, luxury retail shops, hip nightclubs, a spa, 10 pools, and its own beach to complement a 150,000-square-foot casino.

Now, as the postmortems are pronounced after its second bankruptcy, a recurring conclusion is that Revel probably was the right idea at the wrong time and place.

In a note to investors on Thursday, gaming analyst Andrew Zarnett of Deutsche Bank AG wrote: Revel "should never have been built, not because of its bad design, location, or business plan, but because you just don't add more supply in a declining revenue market where competitors are bringing supply closer to your feeder markets."

After DeSanctis gave his presentation in 2011, he got a rousing standing ovation. In the audience was Michael Paladino, a gaming analyst for Fitch Ratings, who had been part of a Wall Street panel hours earlier on the gambling landscape ahead.

He recalled telling the audience that for the most part, Revel's "going to be cannibalizing the existing operators."

Revel modeled itself after Borgata, the city's top-grossing casino, and aimed for its clientele. But it never drew them.

Tom Ballance, president and chief operating officer of Borgata, was hired by Boyd Gaming Corp. in 1998 to oversee development of that casino. He said in fairness, Revel faced conditions that didn't exist when Borgata opened nine years earlier, in July 2003.

"The Atlantic City market had grown for years before we entered it, so we were adding supply in a growing market," Ballance said last week. "And 2003 was a very healthy economy -- housing and employment was high. It was a great time to open a casino in Atlantic City.

"April 2012 was a much more challenging environment," he said. "The A.C. market had been shrinking, and Revel had to compete against regional competition that didn't exist [in 2003], and macroeconomic conditions were much different. That's a fundamental difference."

Game on

The state assistance for Revel was a prospective tax credit, meaning the casino wouldn't see a dime until it turned a profit, but it was needed to assure banks and investors that the project had what it needed to forge ahead.

Christie traveled to the stalled construction site on Feb. 1, 2011, for a news conference in what was then just a shell of the casino. The governor, standing on a mound of dirt with a few structural beams behind him, proclaimed, as hundreds of workers cheered, that construction was moving ahead.


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