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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Morgan Stanley to sell stake in A.C. casino project

5 April 2010

ATLANTIC CITY, New Jersey -- Atlantic City's casino fortunes suffered another body blow on Good Friday.

Late in the day, investment firm Morgan Stanley, the largest owner of the estimated $2 billion Revel Casino project, announced in a filing with the Securities and Exchange Commission that it would sell its stake in the development, which the company valued at $1.2 billion.

No reason was given for the planned sale. Morgan Stanley, which owns more than 90 percent of the ocean-themed hotel-casino project on the Boardwalk, said the divestment would result in a substantial loss to the company.

"(Morgan Stanley) will consider various alternatives to effect the full disposition of Revel which may include a direct sale to a third-party or an auction process," the company said in its brief filing with the SEC.

New Jersey gaming regulators had demanded that top Morgan Stanley officials submit extensive personal and financial information to enable the state to determine if they would qualify to hold a casino license. The deadline for the submission is this week.

Howard Chen, an analyst with Credit Suisse in New York, told investors the move wasn't a surprise.

"Management spoke to one or two remaining legacy issues to clean up at a recent meeting in early March," Chen said on Friday.

The news followed Pinnacle Entertainment's decision last month to sell an empty gaming parcel on the Boardwalk and MGM Mirage's decision to sell its 50 percent interest in the Borgata.

The Revel project has been troubled since January 2009, when it ran out of money and laid off 400 workers. Work continued on the 2,000-room hotel tower's exterior, but inside work was halted until additional financing could be found.

Work on Revel began in 2007, just before the national recession hit and credit markets dried up. The project is viewed as crucial to Atlantic City's success in competing with expanded gaming in neighboring states.

On Thursday, Revel Chairman and Chief Executive Officer Kevin DeSanctis said the company was "very close" to a deal with China's Export/Import Bank to secure the remaining $1 billion needed to finish the half-built project.