Bankruptcy judge ruling a 'blow' to Revel owner

In what is yet another chapter in the ongoing saga of the former Revel casino in Atlantic City, a bankruptcy judge this week made a ruling that could be a "blow" for owner and Florida developer Glenn Straub but a boon for one of its tenants.

Straub and his legal entity Polo North Country Club Inc. have been in an ongoing legal battle with IDEA Boardwalk Inc., the club operator tenant at the former Revel, which is now known as Ten after a rebranding in September this year.

IDEA been in litigation against Polo North since at least 2015 when a federal judge approved the casino's sale; and since at least 2013 with former parent company Revel Entertainment Group when it emerged out of Chapter 11 bankruptcy.

U.S. Bankruptcy Judge Michael B. Kaplan recently told Straub and IDEA to take their ongoing battle to state court.

Before that, Kaplan on Oct. 21 ruled IDEA could remain in possession of its leased space as long as it lived up to terms of the prior lease agreement with the casino, specifically its obligation to pay rent, according to Michael J. Viscount Jr., partner at Fox Rothschild.

Kaplan also ruled that Polo North is excused from "performance obligations, except to allow for IDEA’s continued possession, together with IDEA’s use and quiet enjoyment of the premises," according to court filings.

Prior to the ruling, performance obligations for Straub had included maintenance, repairs, and further build outs.

IDEA's monthly rental obligation, or $7 million in this case, is based on a percentage of revenue received from the operation of the club venues, according to court filings, which said Polo North's percentage share may vary depending on IDEA's actual capital contribution.

Fearful that it would not see the $16 million it already invested as part of the $80 million allotted for the construction of the two night clubs and a beach club, IDEA began withholding rent, which is around $7 million. With both sides – IDEA and Polo North – claiming the $7 million should be their own, the legal dispute arose.

The lease was entered into before Revel filed bankruptcy, and the funding has been in escrow pending a determination of whether IDEA can recover that $16 million, according to Viscount and court filings.

The most significant ruling Kaplan made in the Oct. 21 filing, however, is that if the lease entitles IDEA to recover the $16 million, that money can offset what Straub and Polo North is owed as rent going forward, said Viscount, who described the ruling as "a blow to Straub."

It's a blow to Straub because he and Polo North contended it acquired the casino "free and clear" of the claim for the return of the $16 million against Revel and, regardless, that the debt was wiped away by the Chapter 11 bankruptcy, according to Viscount and court filings.

"IDEA is pleased with Judge Kaplan's ruling," Barry Roy, attorney at Rabinowitz, Lubetkin & Tully, which represents IDEA, told the Philadelphia Business Journal on Wednesday. "It ensures IDEA will receive the benefit of its bargain under the lease."

"We believe — as did Judge Kaplan as he says in his opinion — that the decision provides the framework for parties to resolve the dispute without the necessity of further litigation," Roy said. "With that said, IDEA looks forward to working with Mr. Straub and the management team in order to make Ten a success."

Stuart J. Moskovitz, attorney for Polo North Country Club, did not respond to a request for comment.

Source: Philadelphia Business Journal