The $2.4 billion Revels Atlantic City casino is expected to file for bankruptcy today, one year after opening. It’s estimated by Revels to be currently worth $246 to $331 million. Total disaster. So what happened?
From Thursday’s Wall Street Journal:
Seven years ago, Morgan Stanley MS +0.54% executive Michael Garrity took on an unusual job within a securities firm: casino developer in Atlantic City, N.J.
The imposing casino, called Revel, opened a year ago but has been a financial disaster. Morgan Stanley in 2010 pulled out and wrote down nearly $1.2 billion it poured into the project. Mr. Garrity, who left Morgan Stanley that year, took control of Revel only to lose that grip last week, and the project is expected to file for bankruptcy protection on Friday.
Other recent investors could be out as much as $700 million, they say.
Read on:
As Mr. Garrity envisioned it, Revel would transform Atlantic City from a flagging center of convenience gambling into a destination for business executives and young weekenders…………………………Among the features that were supposed to set Revel apart: restaurants from celebrity chefs, concerts from top-of-the-charts artists like Kanye West and Beyoncé, a smoking ban and an airy design that embraced its beachfront setting.
Sounds pretty good although I do see one little glitch. Anyway, I don’t gamble so it’s not my problem.
Or is it?
The resort also became a central part of New Jersey Gov. Chris Christie’s plan to broaden Atlantic City’s appeal as the East Coast’s one-time gambling monopoly battled new competition from nearby states, including Pennsylvania.
But heavy gamblers rejected the casino so emphatically that Revel underperformed even modest expectations.
As New Jersey taxpayers, isn’t it comforting to know that our governor has invested our money so wisely?
Revel casino, pictured last week.
Well since we have been forced to have a stake in the success of the Hindenburg, let’s at least find out what happened:
Not even the biggest skeptics counted on how poorly Revel would perform when it opened in April. Many insiders blamed the casino’s smoking ban. While Atlantic City law requires much of the casino area to be nonsmoking, Revel is the only casino with a complete smoking ban.
Messrs. DeSanctis and Garrity resisted pleas from investors to allow smoking, arguing that doing so could alienate customers looking for a different type of resort experience, according to people familiar with the matter. One investor says he sent the men emails imploring them to “throw a party and have the Marlboro Man out front” but they stuck with the ban.
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I wish at this point to sincerely apologize to the Hindenburg for uncharitably comparing it to the implosion at Revels. The Hindenburg didn’t cause losses anything near $2 billion dollars.
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