PHILADELPHIA — A federal appeals panel Friday ruled in favor of a major tenant at Revel Casino-Hotel, clouding the fate of the shuttered Atlantic City megaresort just days before it is supposed to be sold.
The U.S. Third Circuit Court of Appeals in Philadelphia reversed a lower-court decision that had stripped the tenant of its rights and cleared Revel’s sale to Florida real estate developer Glenn Straub for $95.4 million. Straub is scheduled to close the deal Monday.
The appeals court has allowed the sale to go forward, but the ruling means Straub must deal with the owner of the HQ nightclub that once operated inside the casino hotel, Revel attorney Michael Viscount said.
“Whether the nightclub operator can remain in possession will have to be decided later if Straub purchases the property,” Viscount wrote in an email.
Stuart Moskovitz, Straub’s attorney, said Friday night he had not yet spoken to Straub about the ruling and declined to comment on whether it could derail the sale. Moskovitz, however, did say it was Straub’s “intent” to buy Revel without having to deal with HQ or any other tenants.
Straub, in an earlier decision by a bankruptcy judge, was given the right to boot out HQ and other tenants so he could complete Revel’s purchase “free and clear” of any leases. Although the sale is scheduled to close Monday, Straub has threatened to walk away from the deal if there are any delays.
IDEA Boardwalk LLC, owner of the HQ nightclub, had tried to block the sale from going through, saying the $16 million investment it made at the property would be wiped out if Straub takes over. But the appeals ruling preserves IDEA’s rights as a tenant and puts it in position to negotiate with Straub over its demands.
During oral arguments Friday, IDEA attorney Jeffrey Cooper told the three-judge appeals panel that the company would like to work out a deal to reopen the nightclub by the summer.
“We can still open up again,” Cooper said.
Straub wants to remove HQ and other tenants as part of his proposed rebranding of Revel with a different name and new amenities. In January, Straub said he plans to add a $108 million water park that would be the largest of its kind in the world and would start high-speed ferry service between Atlantic City and Manhattan.
Revel attorney Jason Zakia asserted that the HQ nightclub and other tenants inside Revel must be removed to avoid “interfering” with Straub’s plans to take over the property.
Zakia urged the appeals panel not to delay the sale, warning of the possibility that the entire deal could collapse if it does not go through by Monday. He said Revel would “end up with a disastrous situation” if Straub backs out.
“We are desperately trying to close the sale at $95 million,” Zakia said.
At the same time Straub has been fighting with HQ, Revel has been embroiled in a dispute with the owner of a utility plant that supplies the casino-hotel complex with electricity and water. ACR Energy Partners, seeking payment from Revel for its services, had threatened to turn off the electricity, but the company agreed this week to keep the power and water flowing until a court hearing Wednesday.
Meanwhile, attorneys indicated Friday that Revel could probably keep Straub’s $10 million deposit if he abandons the sale, but whether that money could sustain the casino long enough in bankruptcy court to find another buyer is not immediately clear.
Revel’s lawyers said earlier this month that the casino could be forced to liquidate if the sale is not finalized by Monday. Citing the “palpable risk of losing a ready buyer,” U.S. District Court Judge Jerome Simandle in January denied IDEA’s request to halt the sale. The ruling Friday reversed Simandle’s decision and remands the dispute back to U.S. District Court.
Revel, which was developed in 2012 for $2.4 billion, is emblematic of Atlantic City’s struggling casino industry. Along with Revel, the Atlantic Club, Showboat and Trump Plaza casinos closed last year, costing 8,000 workers their jobs.
During oral arguments, the appeals panel suggested Revel’s sale is part of a broader “public policy issue” to help revitalize the Atlantic City economy. Facing intense competition from casinos in neighboring states, Atlantic City’s gambling industry has seen its annual revenue cut nearly in half from its 2006 peak of $5.2 billion.
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