Revel Hotel Casino

By DONALD WITTKOWSKI Press of A.C. Staff Writer | Wednesday, March 31, 2010

ATLANTIC CITY — Capping months of negotiations, a final agreement with a Chinese bank for financing to complete the $2.5 billion Revel casino project appears imminent, according to papers filed with New Jersey gaming regulators.

Meanwhile, a Fairleigh Dickinson University poll shows New Jersey residents are opposed to tax breaks for the casino project.

Wall Street financial giant Morgan Stanley, which has invested close to $1.1 billion in the casino so far, would retain its 94.5 percent ownership stake in Revel. That would clear the way for a loan agreement with the Export-Import Bank of China for “well in excess of $1 billion,” the Division of Gaming Enforcement disclosed in a petition submitted to the Casino Control Commission.

Developer Revel Entertainment Group has been in negotiations with the government-owned Chinese bank since last year in hopes of obtaining the funding to finish what would be Atlantic City’s 12th casino. John Mack, Morgan Stanley’s chairman and former chief executive officer, also has been involved in discussions with Chinese bank officials for Revel’s loan.

The Division of Gaming Enforcement petition, dated Feb. 10 and obtained Tuesday by The Press of Atlantic City, goes on to say that Morgan Stanley’s equity in the casino would provide the “additional security” required by the Beijing-based bank, also known as China Eximbank.

“It appears that a loan from China Eximbank for the completion of Revel’s project is imminent,” the petition said.

Mark Lake, a Morgan Stanley spokesman in New York, declined comment. Kevin DeSanctis, Revel’s chief executive officer, confirmed the contents of the petition, but characterized the financing negotiations as a “very fluid situation.”

“I would always temper my enthusiasm with the understanding that with any financing situation, it is dynamic and could change very rapidly,” DeSanctis said in an interview Tuesday.

The financing deal would erase fears that the underfunded Revel project may never be completed. Revel may be the only casino built in Atlantic City for years to come and is considered by many to be key to reinvigorating a gaming market mired in a three-year slump. The company halted construction on the interior of the casino-hotel complex last year to stretch out what money it had on hand. Work has continued on the exterior of the casino and the 1,900-room hotel tower.

Originally scheduled to open in 2010, the casino has had its completion date pushed back to 2011, and it now appears 2012 is more realistic. DeSanctis said it will take about 20 months to finish the project once the financing is obtained and construction resumes on the interior.

DeSanctis noted that Revel plans to use construction materials imported from China, but declined to say whether that would be required under the proposed loan agreement.

“Everything with regards to discussions with the bank is confidential,” he said. “But it’s not unusual to purchase goods from China for a project of this scale. It’s fairly common.”

Financing from the Export-Import Bank would not be the first time the Chinese have been involved in the project. Last September, government-owned China State Construction Engineering Corp. entered into a partnership with Revel contractor Tishman Construction to build the casino.

At the same time it is negotiating the financing deal, Revel is pursuing a $300 million tax break from the state. If the deal is approved by state officials, Revel would be reimbursed up to 75 percent of the casino’s sales and room taxes for 20 years. Critics led by casino labor union Local 54 of UNITE-HERE oppose the tax break, saying it would be unfair to Atlantic City’s existing gaming halls.

Revel also has applied to Atlantic City to redirect $50 million of its property taxes for public improvements — including street repairs and upgrades to the Boardwalk — in the area surrounding the casino.

Morgan Stanley’s involvement with the project began in 2006, when it paid $74 million to buy the oceanfront development site, next to Showboat Casino Hotel at the northeast end of the strip of Boardwalk casinos. The Division of Gaming Enforcement’s petition said Morgan Stanley has financed the project so far through a series of payments totaling $1.068 billion. The most recent payment of $22.6 million was made on Feb. 1.

“It is expected that Morgan Stanley will continue making further periodic installment payments to Revel until sometime in the spring 2010,” the petition said.

Revel is a wholly owned subsidiary of Morgan Stanley. The “Revel” name would stay on the casino and DeSanctis would remain CEO of the project under the proposed financing arrangement. China Eximbank would not have ownership in the casino.

Revel, a gaming company with no prior experience in developing casinos, was selected by Morgan Stanley in 2006 to design, build and operate the Las Vegas-style gaming resort. Revel also holds a small ownership stake in the project.

In its petition, the Division of Gaming Enforcement is demanding more information from Revel and Morgan Stanley as part of the requisite background investigation for a New Jersey gaming license. The division said both companies have not made full disclosure. It is asking the Casino Control Commission to order them to provide updated information about their business dealings and the personal history of key executives.