Revel Atlantic City Resort (2012-2014) - 57-Story Casino Closed Within Two Years Of Opening, Thousands Of Jobs Lost

[DonRocks]

"Chris Christie Loses A Big Atlantic City Bet, Posing Another Challenge To 2016 Run" by Paul Kane on washingtonpost.com

The Revel Casino was Governor Christie's pet project - a 57-story, $2.4 billion dollar casino that was supposed to represent the future of Atlantic City, but closed two years after it opened - thousands of jobs have vanished.

The Post article, while politically biased against Christie, mentions insiders saying he got "duped" by throwing his ample weight behind such an expensive casino during turbulent economic times. Revel, Showboat, and Trump Plaza are all supposed to close this month, leaving a void of nearly 6,000 jobs, or about 20% of the Atlantic City workforce.

When Christie took office, Revel was $1 billion into construction, and Morgan Stanley was going to declare a $1 billion loss and halt work; Christie made it his mission to plow forward to completion. These numbers suggest that $1.4 billion came on his watch, due to his decision.

Christie found private investors, luring them with tax incentives known as "tax increment financing" (well-explained in laymen's terms in Wikipedia).

For a more economical, less political, viewpoint, I turned to online.wsj.com, namely an article by Josh Dawsey and Heather Haddon: "Closing Of Revel Casino Deals Another Blow To Atlantic City."

In the article, Jeff Hartman, a former Chief Executive at the Revel, says, "The Revel is definitely a blow for Atlantic City, gaming in general, and the state of New Jersey. The competitive headwinds were just too difficult at this point in Atlantic City. This will have an impact on how investors look at Atlantic City and the industry."

There are various proposals being discussed as to how to salvage the Revel, none of which are being widely accepted, perhaps because The Borgata already has a toehold on the upscale market, and the casino's problems mirror a broader trend. According to the Wall Street Journal, "Atlantic City has faced increased competition from Pennsylvania and Maryland, along with the prospect of new non-Indian tribe casinos in New York state. The city's gambling revenue is down to $2.86 billion in 2013 from $5.2 billion in 2006." The city's unemployment rate is currently 13.1%, and likely to climb.

"‹Will the city eventually come back? Will Revel the company eventually come back? Will the building itself eventually comeback? The latter seems the most likely since throwing away a completed $2.4 billion would be foolish under any circumstances.

This thread is about the economic future of Atlantic City, and it's history as an institution for gambling, boardwalk strolling, The Miss America Pageant, and yes, aspects of the Mafia. It is not about the reelection of Chris Christie - it was necessary to bring him up since he was fundamental to the completion of the Revel.

Please feel free to discuss this, preferably in socio-economic, historical terms, rather than as a political thread. Yes, it would be "historic" if a Christie loss could be somehow prescribed to this particular issue, but that remains to be seen, and is well into the future. Let's keep it non-political for now, unless politics are an inherent part of the historical, socio-economic discussion of the Revel.

My kindest thoughts to Atlantic City residents, and to the employees who are now unemployed - I wish I could help you because I would.

[johnb]

A few thoughts:

Macau and Las Vegas are the world's premiere gambling destinations.  Macau, by far the largest, fundamentally exists as the place where rich Chinese businessmen go to gamble, and these guys think nothing of placing million dollar bets at the baccarat tables in the private rooms.  They are its market, and the amount of money floating around there is beyond imagination.  Las Vegas has two primary customer bases; young Californians who drive in to party on weekends, and  the slightly older crowd that flies in from all over to soak up the entertainment/restaurant scene.  Both gamble  as well, a lot.

Both Macau and Las Vegas have a stranglehold on their respective markets, which will not be soon breached.  Both are money machines as a result.  Recently, Singapore has joined the party.

Atlantic City, on the other hand, has never had much glamor.  Its primary customer base was always retirees who came on organized bus trips, or by car, mostly to play slot machines, a very low-end business.  These folks couldn't care less where their slot machines are located -- the shorter the bus trip the better.

Borgata, and then Revel, were attempts to bring a little Las Vegas glam to Atlantic City.  While limited, there is apparently enough of a market for that to support one but not two; since Borgata was first on the scene, it grabbed that market.  Revel never could get enough business to make a go of it.  It's no surprise that Las Vegas Sands and Wynn, the two big operators in both LV and Macau, both took a pass on Atlantic City.

Atlantic City's biggest problem is that its retiree customer base now has many other options.  Indian casinos and other casinos now have come into the picture, because state limits on casino development have been  greatly eased.  LVS even has a development in Bethlehem Pa.  These places are nicer and easier for Atlantic City's customers to get to.  In essence, AC has had its legs cut off.

If AC has a future, it isn't in the gaming business.  Maybe they'll come up with a viable strategy, but I wouldn't hold my breath.  It's going to be a tough time for those folks who are now looking for a new job.

[DaveO]

I don't view the Post article as biased at all.  Its about Christie.  Christie is in the title of the article.  It brings up the hotel and the fiasco.  That is a relevant topic when discussing Christie.

Christie is aggressively political.  He takes strong stands.  He pummels the opposition in a political way.  He was pummeled by the further right for his actions following hurricane Sandy.  They guy is political in every manner by his own decisions.  There should be articles about him in a political vein.

The WSJ article is different.  Its about the hotel.  It avoids Christie entirely.

Its often interesting to read articles about the same topic in the NYTimes and the WSJ or the WSJ and the WashPost.  Its fascinating to see what is included or not included in articles...about the same topics no less.  Although in this case I view the articles as about two separate topics.

As far as the impact of this huge failure...Whew.  Its a  big one.  That big a building.  That large a hotel that isn't filling rooms nor attracting enough gamblers.  That is a lot of money down the drain.  Morgan Stanley was going to walk from it when it was half constructed.  WOW!!!!!   You have to have an enormous mess to walk from a construction project half constructed.  It also has to be a big pie in the sky deal to go forward with only half of it financed.   Some m****f***ers got this thing off the ground when it shouldn't have proceeded at the beginning.  I can't help but think some "guys" at the beginning got some big big fees!!!!

If the state doesn't step in any further, someone is going to buy this thing for pennies on the dollar after bankruptcy.  They'll still have to operate it and try and make it work, but they will be getting it cheap for past mistakes.

[DonRocks]

I don't view the Post article as biased at all.  Its about Christie.  Christie is in the title of the article.  It brings up the hotel and the fiasco.  That is a relevant topic when discussing Christie.

You're right.

What I was trying to say is: I don't want *this* thread to devolve into a political argument - without moderation, Godwin's law could come into play very quickly here. This is a "History" forum, and yes, politics are part of the story and a *huge* part of history in general, but my intent is for this to be about Atlantic City and the Revel as part of modern-day history.

Framed in the format of your quoted text: 'It's about Atlantic City and the Revel. They're in the title of the article. It will bring up Christie. He is a relevant topic when discussing Atlantic City and the Revel.' See what I'm saying? The two things are reversed when it comes to emphasis.

I also wrote this to show that there is virtually *no* topic that cannot be discussed in our website forums. I happened to stumble across the Post article, rolled up my sleeves and dug a little deeper, and became interested enough to begin a thread about it, hoping for some interesting discussion which we've already gotten (from both you and johnb).

[DonRocks]

Atlantic City's biggest problem is that its retiree customer base now has many other options. 

Is it ludicrous (not Ludachris which would go in the Music Forum) to make any connection whatsoever between Atlantic City and the Borscht Belt? I wasn't around to witness its decline, but there's something oddly disturbing in the back of my mind telling me 'yes, there is' (and now that I'm typing this, I'm wondering if the passing of Joan Rivers has anything to do with this gnawing little lesion, pecking at me somewhere deep inside my brain).

[DaveO]

I don't agree with the context in which you have placed this ->: History; I view this more as Business than History; Possibly Business History.

Back in the 1980's I had a unique look at a number of what were in my mind clearly terrible loans made by the Savings and Loan Industry for Commercial Real Estate. How I got to look at these loans and my perspective is a separate long story, but I recall seeing loans for office buildings being approved and made during the early to mid 1980's that clearly didn't make sense in the immediate or intermediate periods.   By the time I witnessed these loans being approved there was already a clear indication of SUPPLY of office space CLEARLY OUTSTRIPPING DEMAND.  Its the old fundamental Supply and Demand Curve from intro Economics.

Regardless in this region and across the country there were more loans made for more office buildings than at any time previously and month after month, year after year during the 1980's, SUPPLY of SPACE dramatically outstripped DEMAND.  In the mid to late 80's this caused a crisis in Texas and other parts of the SouthWest where the situation was at its worst.  By Spring 1989 it caused the entire national commercial Real Estate world to hit a block and turn into an industry Depression.  Subsequently after that we had a national recession.  (In a sense it augured what occurred in the 2000's with the housing/banking financial crisis).   Too many loans for too many new properties that blew the markets out of the water, caused a financial bubble and then a crisis.   That is my take. (after a lot of perspective).

I look at the size and scope of that huge hotel deal and other existing issues that preceded and I see lousy underwriting for an enormous project of gargantuan proportions being made with terrible underwriting standards and research.   An enormous cr@ppy deal.

After all, Morgan wanted to take the project into bankruptcy while it was halfway through construction.  That virtually never occurs in a vacuum irrespective of other market concerns.  That speaks to how bad it was.

But, in the 1980's, during the run up to the housing crisis, and with regard to this big project lots of players were making a lot of fees to get the project going.  Fees drive a lot of real estate deals.  (Hell, I was a fee guy, as a commercial RE agent/broker)   Many of the deals that get financed are driven by fees.

Its the way of real estate and banking.

So I see this thing as a gargantuan terrible development that never should have been done in the first place based on the pure economics and business sense of it.

But business sense is often overruled by lots of outside perspectives which could include fees, politics (trying to spur development in Atlantic City) and all sorts of other items that could spur the project and investment.

Anyway if it all goes bankrupt than somebody, probably with deep deep pockets, will buy it later for pennies on the dollar and try to make it work on an operating basis.   We'll see.

Meanwhile of course, all these closed casino's in Atlantic City will cost a lot of jobs and a lot of suffering.  No doubt.   It appears there are too many casino's around in the East offering a lot of competition.  I wonder how these Md casino's are going to do in light of a plethora of nearby casino's, and secondarily how they will effect the one's in nearby states.

Meanwhile, for me, having been wiped out one terribly bad night playing blackjack while drinking too much and trying to act like a big shot I swore off casino gambling for decades.  I was so disgusted afterwards.  I punished myself for the rest of the vacation by basically restricting my diet to lettuce.     Live and learn.  

[DonRocks]

"Trump Entertainment Resorts Files For Bankruptcy" by Jonathan Berr on cbsnews.com

[DaveO]

FoxNews wrote an article similar to that of the Post in that it both references Christie and the job losses in Atlantic City.  Like the Post article it ties the economic problems to Christie's political aspirations. If I were back to analyzing politics I'd look to the WSJ to see if they would cover these topics as did Fox and WashPost.

It is a devastating economic hit to the Atlantic City area and its inhabitants.  Projected total losses of jobs with the announced closings at 8,000.  Per the Dept of Labor NJ has total employment of 4.1 to 4.2 million But on a more local basis the Atlantic City area has total employment of 110 to 118 thousand.  It will be devastating to that area and its inhabitants.  Additionally Atlantic City Casino revenues have dropped from $5.2 billion at peak to more recently $2.9 billion.

The closings and job losses will be immense for the Atlantic City region.  Meanwhile with casino's opening everywhere it has to hurt the older more established casino areas.  I've read that the Connecticut Mohegan Casino area near Rhode Island, one of the older established casino areas in the East, has similarly lost revenues to competing casinos that are nearby.

Meanwhile there is significant growth in online gambling and growing politicization of the topic.  Possibly the most notable opponent of online gambling is Sheldon Adelson, multi billionaire and owner of Casinos in Las Vegas and Macao.  Adelson is also one of the most notable huge money contributors to American Politics and solidly supportive of GOP candidates.

(@Don:   Dang, with all the interactions of money, business and politics, its frankly difficult to separate the topics and keep a discussion apolitical.)

But 8,000 lost jobs in Atlantic City, probably primarily in the hospitality business is sad indeed.  On the other hand, with all these new casinos sprouting up in neighboring states they must be creating jobs in those areas and states.

[DaveO]

Oh this is an ugly financial mess.  There is a deal to buy the hotel, or be used as a "stalking horse" to generate bigger offers. The "deal on the table" is for $90 million or roughly $0.04 on the dollar for the cost of development.   Now that is a friggin financial mess multiplied to the nth degree.

If some player does purchase the property, even at an enormous discount, one can only hope they'll put it back to work and rehire people.  Who knows?  We'll see.

[Joe H]

We've been to Revel twice including a week or so after they opened.  We stayed at the Borgata and, excepting when we walked out on the Boardwalk, we missed it.  Revel seemed to be designed to appeal to an age range of 25-40.  I could not help thinking (and this reflects my age) that John Travolta and his group in Saturday Night Fever would have loved the Revel if they went to Atlantic City.

We didn't like it all.

At this point the only hotel in Atlantic City we will go back to is the Borgata and, to be honest, my wife gets the room for free because she gambles a couple of hundred dollars in slots.  Well, I do to.  Also, I passionately love Chef Vola's.  In fact Vola's maybe the only reason that we continue to go to Atlantic City.

With the Taj Mahal about to close, Trump Plaza and the Showboat recently closed and a fifth hotel (the original Golden Nugget) closed, Atlantic City very much feels like a sleazy ghost town.  I don't know what else they could build or open that would pull people in there.  I don't know how you ignore towers that are 500 and 600 feet tall which are empty.  Families left A. C. for Wildwood, Ocean City, NJ and Long Beach Island decades ago. The only thing that is really left to prop the city up is the now occasional convention and I'm not sure what the future of these may be.

With the opening of Harrah's in downtown Baltimore (and the nearby Aldo's to take Chef Vola's place), the upcoming apparent Borgata like casino hotel at National Harbor, huge casinos in the Poconos and multiple greater Philadelphia area racetracks with casinos (Chester, Delaware Park) and both Foxwoods and Mohican Sun (each as big as the Borgata)-all pulling people from the 40 million who live within 150 miles of Philadelphia-there's not a lot of reason to drive to Atlantic City anymore.

For me the real question is the future of Chef Vola's.  It won't be the same anywhere else but I can't see it continuing to survive with what is happening in Atlantic City.  My guess is that at some point they'll be forced to move into Philly or open in another casino hotel (or Vegas) and when that happens you'll know that Atlantic City is about to close the rest of its doors.

[DaveO]

Dang.  Just saw this news about the sorry state of Atlantic City finances following the closings of so many casino's and the loss of so much business.  That region has really crashed.  Sad.

[DaveO]

Terrible job losses over the last year:  About 10,000 in the region....and its not a big region.  This part of the country probably experienced the worst job loss statistics over the past year.

Atlantic City...it became all about gambling ....and the state also gambled on it...and lost.   What a freaking mess.  How sad.

[DonRocks]

Terrible job losses over the last year:  About 10,000 in the region....and its not a big region.  This part of the country probably experienced the worst job loss statistics over the past year.

Atlantic City...it became all about gambling ....and the state also gambled on it...and lost.   What a freaking mess.  How sad.

Yeah, and I just don't see a solution that involves gambling by itself. Maybe if they develop it into a really nice beach resort with amusement parks, beautiful beaches, restaurants, etc., it will help in the long term, but they'll need to give some of the proceeds to the city so the non-beach parts can become nice, too. It's doable, but it might take decades.