What's Revel worth?
That question’s at the heart of a dispute between Atlantic City and the defunct casino resort’s bankrupt parent, which on Thursday suffered a blow in its fight to rework a real estate tax load that Revel calls illegal and wildly inaccurate.
A federal judge ruled Thursday that Revel cannot reopen a prior court case to void a settlement on the property’s assessed value for 2014 and 2015. Revel spokeswoman Lisa Johnson said Friday that the company plans to appeal.
U.S. Bankruptcy Judge Gloria Burns also gave the green light to a tax-certificate sale the city says will help it recoup about $32 million in unpaid 2014 Revel real estate taxes.
On Tuesday, Revel asked Burns for an emergency hearing on its bid to nix the settlement, telling her the company couldn’t resolve the issue in negotiations with the city last week.
The settlement, which received court approval in April 2013, pegged Revel’s value at $1.15 billion for property-tax purposes in 2014 and 2015. The 2015 figure was later slashed to $625 million, according to court papers.
Last month, Burns gave Brookfield US Holdings LLC permission to pay $110 million for the Boardwalk property, which cost $2.4 billion to build.
Revel says the assessments are arbitrary and unsupported by the on-the-ground realities of the economy in Atlantic City, which suffered three casino closings this summer.
Atlantic City, Solicitor Jason Holt said Friday, “will vigorously defend our ability to collect taxes from Revel.”
How does one reckon a property’s fair market value?
Dr. Michael Busler, a finance professor at Richard Stockton College, said that even under stable economic conditions, “it’s very difficult to determine.”
And when a property sits in a mutating market such as Atlantic City, where casino revenue is about half its 2006 peak of $5.2 billion, “extreme challenges” arise.
For many economists, a property’s fair market value “is what somebody is willing to pay for it,” Busler said. But he said it’s a matter of debate among economists whether that axiom holds true when a property is sold under duress at a “distressed rate” via, for example, a bankruptcy auction.
What isn’t debated, he said, is that the contraction of the gambling market has wrought great change for Atlantic City’s casinos. “Due to market conditions, the market value to these properties has fallen dramatically.”
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