China In, Morgan Stanley Out at Atlantic City Casino
By Casino Connection Staff Fri, Apr 02, 2010

Wynn might take over

Beijing-based Export Import Bank may have the deep pockets necessary to fund what's left of Atlantic City's only ongoing casino construction site, Revel. But one day after the report on the possible investment was made, principal financer Morgan Stanley announced it would sell its ownership. Parts and supplies may also be made in China

It was a good news-bad news week in Atlantic City for Revel Entertainment. With a possible investment for the final financing about to fall into place, Morgan Stanley announced it would pursue a sale of its $1.2 billion investment in the property. Exterior construction will be completed in June and if construction on the interior space begins immediately, the property could open in 20 months from that time.

While the Morgan Stanley sale will not halt the project, it's unclear if the company's withdrawal would impact the investment by the Chinese Bank, which may invest more than $1 billion in the casino project, assuaging fears that the project, which rises 710 feet above the city's Boardwalk, might go unfinished.

According to papers filed with New Jersey gaming regulators, Morgan Stanley would retain its 94.5 percent ownership stake in Revel. According to a release by the company, it expected to realize "substantial losses" by making the sale.

The Beijing-based Export-Import Bank of China (also known as Exim Bank) would kick in "well in excess of $1 billion," according to the Division of Gaming Enforcement.

Revel Entertainment Group has been trying to make a deal with the government-owned Chinese bank since last year. Meanwhile, construction at the Revel site has slowed to a crawl. While the exterior of the 1,900-rooom mirror-clad hotel tower is almost complete, little of the interior work has been done.

Revel CEO Kevin DeSanctis confirmed news of the Chinese investment, but told the Atlantic City Press that negotiations remain "very fluid."

"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 last week.

More help is on the way from China, with the government-owned China State Construction Engineering Corp. partnering with Revel contractor Tishman Construction to build the casino.

Revel, which broke ground before the recession and is the only ongoing casino project in Atlantic City, was originally set to open in 2010. That date was pushed back to 2011, and DeSanctis now is indicating that the lavish property could open in 2012.

Revel also wants a $300 million tax break from the state that would reimburse up to two-thirds of its sales and room taxes over 20 years. That plan has been assailed by Bob McDevitt, president of UNITE Here Local 54, and former gubernatorial candidate Steve Lonegan. The men have staged protests at both the offices of Morgan Stanley in Jersey City and in front of City Hall in Atlantic City. They say the tax break would be unfair to Atlantic City's existing casinos and constitute a government bailout of Morgan Stanley.

"This is a very narrowly defined legislation to benefit a specific special interest," said McDevitt, whose union represents 14,000 casino and hotel workers. "They shroud it in that this is going to save the city. It's not going to save anything. This bill will not be anything more than a drain on what already is overcapacity in Atlantic City."

According to news reports, Exim Bank would have no ownership of the Revel casino, which would be Atlantic City's 12th. Lonegan was not convinced, and recently told protesting union members that half the profits from Revel would end up in "Communist China."

Meanwhile, a visit to Atlantic City last week by Steve Wynn, purportedly to look at his old haunt, the Golden Nugget, now the Atlantic City Hilton, was all the buzz. Wynn, who has been negotiating with a group of Philadelphia casino investors to take over the dormant Foxwoods project, could instead opt for a return to the Boardwalk, which has a much lower tax rate and upgraded facilities. And if that return included taking over Revel, which promises to be Atlantic City's biggest and best casino, he could change the game in the city by the sea.