Brookfield Asset Management, which seemingly came out of
nowhere to win the bankruptcy auction for Atlantic City's Revel Casino Hotel,
will have two key advantages over the property's current owners.
First, the Toronto real estate investment firm with $200
billion in assets will pay $110 million, just 4.5 percent of the $2.4 billion
cost of building the soon-to-be-former Revel. That means debt is not likely to
be a significant factor.
Second, Brookfield already owns two other casinos, the
Hard Rock Hotel & Casino in Las Vegas and Atlantis Paradise Island in the
Bahamas, giving it a Rolodex of customers to entice to its reopened Atlantic
City gambling hall with special deals.
"Revel was a big property, but they just didn't
bring the players with them," Atlantic City Mayor Don Guardian said
Wednesday.
Guardian, who has seen the closures of four casinos since
he took office in January, is optimistic about Brookfield. "I think
they're the right company for this property," he said.
Brookfield said it intended to operate the property as a
casino, but the deal does not depend on the company's getting a gaming license.
A casino consultant said Brookfield has the deep pockets
needed to remodel the property and fix some of its design problems, but warned
that Brookfield needs a formula that will enable it to take customers from
Borgata and other Atlantic City casinos.
"If they come in and say they are going to expand
the Atlantic City market, they're kidding themselves and they're kidding
everybody else," said Saverio R. Scheri III, president and chief executive
of WhiteSand Gaming L.L.C., a consulting firm with offices in Atlantic City,
Las Vegas, and overseas.
Revel closed Sept. 2, eliminating 2,800 jobs. Its sale to
Brookfield US Holdings L.L.C. requires the blessing of bankruptcy court. An
approval hearing is scheduled for Tuesday in U.S. Bankruptcy Court in Camden.
Brookfield competed against Glenn Straub, a Florida
investor whose high bid in the auction, which lasted into early Wednesday, was
$95.4 million. Straub could still buy the property if the deal with Brookfield
is not completed.
No information was available from Revel officials on a
projected closing date.
Brookfield spokesman Andrew Willis said the company was
"excited about owning the newest and highest-quality asset in Atlantic
City," but was "not in a position to discuss the business plan as we
continue to explore various options."
The histories of Brookfield's casinos in Las Vegas and
the Bahamas are instructive.
The financial condition of Hard Rock is a reminder that
troubled casinos are not always easy to turn around.
As one of Hard Rock's lenders, Brookfield took control of
the casino in 2011, not long after it went deep into debt to complete a $750
million expansion. The casino has continued to lose money. It warned in a
Securities and Exchange Commission filing Aug. 12 that it did not have the
money to make an interest payment due Aug. 25.
"Hard Rock casino has been in ongoing talks to
refinance its debt," Willis said. Unpaid principal and accrued interest
totals $987.8 million.
Brookfield has owned Atlantis since May 2012, when it
exchanged $175 million in debt for the property's equity.
Atlantis offers "a blueprint of what Brookfield has
done with a property of a similar scale" as Revel, Willis said.
Brookfield spent $8 million to upgrade hotel rooms, also
improving restaurant facilities, expanding meeting space, and launching a
preseason college basketball tournament, the Battle 4 Atlantis.
In July, Atlantis joined Marriott International Inc.'s
network of independent hotels. "That's bringing in new convention traffic
that Atlantis never had before," Willis said.
Marriott also contributed $100 million to a $1.95 billion
recapitalization of Atlantis over the summer.
Brookfield will not face that refinancing challenge at
Revel, because more than $2 billion in debt - primarily from institutional
investors - has been wiped out in a major financial restructuring and two
bankruptcies.
Fitch Ratings analyst Alex Bumazhny said Brookfield's
financial strength "is a good thing from the point of view of prospects
for additional investment into the market."
It's not clear how quickly Brookfield could be licensed
to operate a New Jersey casino.
"It would be premature for me to discuss what might
happen, since the bankruptcy court has not yet approved the sale," said
Matthew Levinson, chairman of the New Jersey Casino Control Commission.
The New Jersey Division of Gaming Enforcement must decide
what entities need to be licensed and conduct investigations before the
commission can hold hearings.
"We certainly will do this as expeditiously as
possible," Levinson said.
Source: Philly.com
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