ATLANTIC CITY, N.J. – The former owners of the Revel casino are acknowledging a long list of mistakes that helped kill the $2.4 billion resort, including an onerous energy contract that strangled it from the get-go.
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A proposed disclosure statement for its bankruptcy case filed Monday includes a history of Revel, which shut down last September without having turned a profit.
The filing puts much of the responsibility on Revel's initial management, led by former CEO Kevin DeSanctis. It lists problems from construction cost overruns, taking on too much debt, the failure to attract day-tripping gamblers, pricey food and beverages and startup glitches with marketing and technology.
But one of the costliest missteps — and one that continues to plague it now, even as a shuttered building — was its contract with its utility provider. It has long been known that the power plant was a financial drag on Revel, but the filing details just how bad the terms were for the casino.
Unable to raise the money to build a power plant by itself, Revel contracted with ACR Energy Partners to build and operate the power plant. ACR contributed its own money and raised approximately $118.6 million of bonds with an 11.67 percent interest rate to finance 75 percent of the construction cost. In turn, Revel agreed to purchase hot and chilled water, electric and other power exclusively from ACR for at least 20 years.
The contract obligated Revel to pay the firm not only for utility service but to help pay down debt from its construction, and it guaranteed the company a 15 percent to 18 percent return on its investment. Its contract with ACR wound up costing Revel $2 million a month, over and above its energy costs.
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That contract continues to affect Revel to this day. Several prospective buyers were scared away from Revel due to an inability to reach agreement with the company over utility service. And Revel's current owner, Florida developer Glenn Straub, has refused to sign a deal with ACR to provide power to the building, leading the utility company to cut off service two days after Straub took over the building. ACR currently has a restraining order barring Straub from connecting anything to its electrical equipment inside the casino, and the city is fining Straub $5,000 for each day that fire detection and suppression systems aren't powered up.
The plant was meant to help Revel save money on utility costs over the long run and avoid any power outages caused by problems with the city's main power grid. The plant also was meant to power properties created by redevelopment in the area around the casino, but that redevelopment never happened.
Some of the missteps included in the filing were well known, like the high price of food and drinks at the casino, its initial lack of a players' club and its initial disdain for day-trip gamblers, long the bread and butter of Atlantic City's casino industry. But the report also reveals some details, including the price that original owner Morgan Stanley got for Revel when an investment group headed by DeSanctis took over in February 2011: $30 million.
Neither DeSanctis nor ACR representatives immediately responded to requests for comment.
The filing also said a general contractor working on the project "made a series of significant budgeting errors that were not disclosed until right before the April 2012 opening," resulting in Revel being at least $100 million over budget when it began operating.
A 2013 bankruptcy wiped out 82 percent of Revel's debt, but even that wasn't enough, and it filed a second bankruptcy case in June 2014 from which it still has not emerged.
Wayne Parry can be reached at http://twitter.com/WayneParryAC