Brookfield Places Winning Bid for Atlantic City’s Bankrupt Revel

Mike Ratliff, Senior Associate Editor

A Sept. 26, 2014 photo shows Revel fenced off after its closure. Photo: Mike Ratliff.

It looks like Atlantic City is back to having nine casinos. Brookfield Asset Management came out on top of Tuesday’s auction of the long-troubled hotel and casino Revel Atlantic City. The 1,399-key property that features 150,000 square feet of gaming space was developed for a staggering $2.4 billion. Brookfield clearly landed an irreplaceable asset at a deep, deep discount to replacement costs with its winning $110 million offer. The math works out to about 4.6 percent of Revel’s development cost.

That was about $14.6 million more than Florida’s Glenn Straub was willing to lay down to achieve his vision of turning the property into a think-tank, according to Reuters. The sale still requires approval from a federal Judge, which could happen as early as next Tuesday.

Revel AC Inc., a parent company of Revel Entertainment Group, filed for Chapter 11 on June 9. That was its second declared vacancy. The hotel and casino shut down in early September, following The Atlantic City Club, which closed in January, and Showboat, which closed in late August despite still running at a profit. Trump Plaza subsequently closed in mid-September.

Looking north from Steel Pier. Photo: Mike Ratliff.

Yet in spite of four casinos closing in one-year, there might be no better opportunity to invest into the city than now. Commercial real estate prices are at their lowest point in a quarter century. Mayor Don Guardian described prices to CPE as presenting “a better deal than the deepest of discount basement bargain stores.”

Largely led by the city’s Casino Reinvestment Development Authority (CRDA), Atlantic City is working to reinvent itself as a diversified resort destination. Non-gaming revenue has continued to grow and was up over $160 million in the past two years, quickly approaching $1 billion annually.

“We’re pleased to see additional private investment in Atlantic City,” John Palmieri, executive director of the CRDA said Wednesday in a prepared statement. “Buyers would not invest if they were not positive about the city’s business climate. This is another chapter in Atlantic City’s evolution, along with other recent investments such as Bass Pro Shops, Harrah’s conference center, Tropicana’s planned retail and Boardwalk enhancements, the sale of Atlantic Club, Margaritaville, the Boraie mixed-used development and others. This is a very good time to invest in Atlantic City.”

The massive Revel features 1,399 hotel rooms and 150,000 square feet of gaming space. The asset also featured the very popular 40,000-square-foot HQ Nightclub. Photo: Mike Ratliff.

Recent economic developments have approached the $1 billion mark. The Cordish Cos. is building an 86,000-square-foot Bass Pro Shop in a public-private-partnership with the city through the CRDA, which collects and reinvests 1.2 percent of casino revenue. It is located adjacent to Tanger Outlets The Walk, a 109-store open air outlet mall that Tanger bought from Cordish as part of a $200 million, two property sale back in 2011. A new $126 million convention center is currently under construction at Harrah’s. It got off the ground in part due to a $45 million investment from the CRDA. Resorts built a $70 million Margaritaville that opened in 2013. A $9.5 million, 30,000-square-foot indoor food market modeled off of Philadelphia’s Reading Terminal Market is slated to break ground late this year. New Brunswick’s Boraie Development recently received $30 million in CDRA funding to build a 250-unit, mixed-use community with 20 percent of apartments set aside for workforce housing.

The city is also reinvesting in entertainment with plans to expand a pilot concert program that brought Blake Shelton and Lady Antebellum—and roughly 130,000 fans between the two shows—to the beach this past summer. Mayor Don Guardian told CPE that that the stage could be up for as many as six weeks next summer. The CRDA is also investing $10 million into Steel Pier, home to the famed diving ponies of yesteryear, to put in new rides and a $4 million, 250-foot high observation wheel that should be up and running in 2015.

“Pundits say we are not a family place,” Anthony Catanoso, owner/president of Steel Pier told CPE. “We get between 4,000 to 7,000 visitors on a summer night. I love the focus on non-gaming. Eight casinos or 12, it doesn’t impact us much. This will be a family town with a bit of gambling on the side.”