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Atlantic City casino financing questioned

14 January 2008

ATLANTIC CITY, New Jersey -- As reported by the Press of Atlantic City: "The head of the Housing Authority raised questions in an interview Friday about whether Revel Entertainment Group has sufficient financing to follow through on its proposal for a $2 billion casino on which construction has just begun in the South Inlet.

"Dennis Ricci's remarks followed a controversial decision the authority made at a special meeting Thursday night that will hamper Revel's access to $53 million its financers are holding in escrow until it has a so-called reverter clause stricken from its agreement with the authority. The casino, slated to open in 2010, would be the biggest and most expensive in the resort.

"...The authority maintains that all of its redevelopment agreements have carried such a clause, under which developers must complete construction within a specified period - among other requirements - or the land 'reverts' to the Housing Authority. The measure was implemented to hold developers accountable after the resort in decades past saw a slew of failed promises resulting in vacant lots; the authority only removes it from agreements once construction is complete.

"An agreement from a previous developer bearing the clause was carried over to Revel in 2006 once the company, backed by Wall Street giant Morgan Stanley, purchased five acres of authority-owned land as part of its 20-acre beachfront site. Revel only recently submitted papers seeking 20 different amendments, one of them a request to drop the reverter clause.

"The Housing Authority approved the majority of the amendments sought. And it offered to meet Revel halfway, Ricci said, by agreeing to remove the clause once the company secured permanent financing. So far, Revel is operating on $160 million in interim financing in an effort to start construction quickly even though permanent financing was difficult to obtain because of problems in the credit markets. Revel expects to secure permanent financing in three or four months.

"...The unanimous vote has prompted criticism from Revel, which said it was counting on tapping into its $53 million in escrow by the end of the month to proceed with the project. Revel officials met with Mayor Scott Evans in City Hall on Friday to discuss the issue, and several City Council members are backing an ordinance for next Wednesday's meeting that would eliminate the authority's redevelopment powers..."

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