Revel appears to be “burning cash” and its situation has become dire, a top New Jersey lawmaker warned Friday while demanding a state investigation of the $2.4 billion casino’s finances.
Senate President Stephen Sweeney, in a letter to the New Jersey Division of Gaming Enforcement, expressed concerns about Revel’s “precarious financial condition.”
Revel issued a statement denying that it is in financial peril. The statement said Revel is in negotiations with lenders for extra funding to help it recover from Hurricane Sandy and to build additional gambling, food and beverage, and entertainment attractions. The amount of funding was not disclosed, although Revel expects to complete the deal within 45 days.
“Revel’s financial situation is not dire. Our investors and partners have shown a tremendous amount of support for Revel, and believe in our business model,” Revel said.
Sweeney said he has been receiving reports that Revel’s finances “have deteriorated considerably and that the situation has become dire.” Sweeney did not cite the source of his information and his office declined comment beyond the letter.
“The casino appears to be burning cash at an alarming rate,” Sweeney told the division director, David Rebuck, in the letter. “Revel received a $100 million line of credit in August 2012 to help it maintain its operations through 2013. I understand that these funds have evaporated and that the casino has reached out to secure additional funding to survive through the end of the year.”
When Revel lined up the $100 million financing package last August, its chief executive officer, Kevin DeSanctis, said the funding would give the luxury megaresort a bigger cushion to meet its operating expenses.
The deal currently under negotiation with lenders would give Revel even more financing. Revel characterized the proposed deal as another sign of progress as the casino works to build up its business.
“With six months of operations behind us and the addition of new leadership in our hotel operations, we are encouraged by the progress we are beginning to see, particularly in the group and leisure segments,” Revel said.
Sweeney, sounding far more pessimistic about Revel’s future, said Revel owes more than $12 million in property taxes to Atlantic City.
“This is truly an amazing fact considering the property has only been open since late spring,” he wrote in his letter. “Thus, the casino is not only turning its back on its creditors, it is now cheating the city of desperately needed tax revenues.”
Revel is listed among the city’s tax delinquents in a Dec. 11 tax sale notice published Friday in The Press of Atlantic City. However, Revel and the city issued a joint statement Friday saying they are “amicably and expeditiously negotiating” a settlement of Revel’s tax appeal that should be completed in December.
“Thus, we are confident that no tax sale will be needed in order to secure all lawful tax payments due and owing to the city,” the statement said.
Revel attorney Lloyd D. Levenson said the company and city are working through three separate tax cases to determine the casino’s real worth, now assessed at $2.4 billion for tax purposes.
“Right now, they would have it at $2.4 billion. As to the question of how much it is really worth, I can say significantly less right now,” Levenson said, adding that the final figure is pending negotiations.
Levenson said both sides ultimately hope to end the expensive and laborious process for resolving casino tax appeals. In recent years, the casinos have successfully challenged their tax assessments. In response, the city has been forced to borrow money to refund any overpayments made by casinos. This year, the city is issuing $100 million in bonds for those refunds, while last year it was $35 million in bonds for the same purpose.
“The good faith negotiations between Revel and the city are designed to break this cycle, sparing both the city and the taxpayer unnecessary expenses and uncertainty in the calculation of revenues,” the joint statement said.
Sweeney believes Revel’s financial difficulties could jeopardize $261 million in state reimbursements that have been approved for the casino over the next 20 years. Those tax breaks were key to Revel securing an additional $1.1 billion in financing last year, allowing the company to resume construction on what was then a half-completed project, stalled by money shortages.
“The Revel casino’s precarious situation and the state’s significant investment of taxpayer funds warrant a full accounting immediately,” Sweeney wrote. “The consequences of the casino’s collapse could have serious consequences for the region and the taxpayers, especially in light of the impact of Hurricane Sandy. I refuse to stand by and simply hope that the Revel will decide to meet its obligations and continue as a going concern.”
Sweeney is demanding that the Division of Gaming Enforcement should immediately launch an investigation of Revel’s financial stability and present him with a report by Dec. 7. The division originally looked into Revel’s finances in July at Sweeney’s urging, but concluded at that time that the casino was stable and taking steps to pay its bills.
The division also said in July that it would continue to closely monitor Revel’s finances and promised to take regulatory action if needed. Sweeney, though, criticized Rebuck and the division in his letter Friday, saying that they may not have been keeping an eye on Revel after all.
“I am concerned that you and the division have failed to live up to your obligations under the law,” Sweeney told Rebuck.
Lisa Spengler, Rebuck’s spokeswoman, declined to comment other than to say that the division would respond to Sweeney’s letter directly to Sweeney.
Revel has gotten off to a weak start since opening in April. It suffered a gross operating loss of nearly $37 million in the third quarter, on top of a $35 million loss in the second quarter. Month after month, Revel has been near the bottom of the pack among Atlantic City’s 12 casinos in gambling revenue.
Revel is also facing $37.6 million in construction liens from contractors that are awaiting payment for building the casino, according to an analysis by The Press. Revel has pledged to pay contractors everything they are owed once it completes a final audit of construction bills.
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