Straub to buy Revel power plant, end litigation
Developer Glenn Straub, utilities and a bank reached a deal Tuesday that removes a major obstacle to the reopening of Atlantic City's former Revel casino.
A federal judge helped the parties hammer out an agreement behind closed doors in which Straub's Polo North Country Club, ACR Energy Partners and Bank of New York Mellon resolved their differences and cleared the way for Straub to focus more intently on the future of the former casino.
Straub said after the hearing that he will now solicit casino operators interested in a 30-year lease to run gambling operations at the site, but on a smaller basis than what was there before.
Revel cost $2.4 billion to build but never made money. Straub bought for $82 million from bankruptcy court.
"It's not going to be the old Revel," Straub said. "But now we can talk to casino operators and tell them we're interested in a 30-year lease. No one would want to sign a lease under the old circumstances when the future of the property was so uncertain."
Straub said he hopes to have at least part of the property open by summer 2016, which could include an indoor-outdoor water park.
"It won't be 7,000 parking spaces, but we'll have something open," he said.
U.S. District Court Judge Jerome Simandle declared himself "very pleased and very surprised" at the pact.
"This represents a great step forward for this property and its rejuvenation," he said. "It's an important step for Atlantic City. It may build some confidence that Atlantic City remains viable."
Under the deal, which needs to be signed by all parties by Dec. 2, Straub will pay $30 million and ACR, which owns the power plant that was Revel's sole source of utility service, will pay $15 million into an escrow account to pay off power plant bondholders.
Straub will assume ownership of the utility plant, while a corporate affiliate of ACR will retain ownership of a cogeneration plant located inside the central utility plant. That company will disconnect and remove the equipment.
A company named DCO will fire up boilers at Revel and operate the power plant, and Straub will set up accounts this week with Atlantic City Electric and South Jersey Gas for future utility service.
Most importantly, the deal would end a morass of litigation that has been the major obstacle thus far to Revel reopening. ACR had fought to ensure that Straub got utility service only from it. But ACR was in danger of being foreclosed on by its bank.
A literal power struggle between ACR and Straub has persisted since the day he bought the casino in April. ACR wanted a contract with Straub for future service at Revel which included paying off debt incurred for the power plant's construction, but Straub refused.
Two days after Straub bought the building, ACR cut off service. That led to Atlantic City fining Revel for not having fire safety systems operational, and a state agency ordered ACR to provide just enough power to keep emergency systems working. That uneasy arrangement lasted for months, and spawned new lawsuits of its own.
The deal does not end litigation over whether Revel's former business tenants can remain there if the property reopens, but Straub's lawyer, Stuart Moskovitz, said that is a more easily resolved matter than the protracted utility dispute.
No sooner did Straub get rid of one headache than another surfaced: Atlantic City Council president Frank Gilliam said he will move to name a redeveloper for the neighborhood surrounding Revel, which could lead to the former casino being declared blighted and possibly condemned by the city if it doesn't reopen soon.
Moskovitz said, "If they try to do that, they're going to destroy Atlantic City, when you have someone that has put his money up, and they're playing games."
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