There's no savior for Atlantic City's biggest project, the half-built, long-stalled 53-story Revel hotel and casino, which will likely be mothballed, The Post has learned.
The 20-acre development next to the Showboat is a victim of the economy and the four-year decline of the gambling town.
Additionally, the
Morgan Stanley has taken the biggest bath on Revel, having already booked massive losses. In the third quarter, the Wall Street bank reported its $1.2 billion investment was worth only $40 million.
This fall the bank, using JPMorgan as its adviser, began pitching mostly hedge funds on the prospect of investing an additional $1.3 billion to finish the project. In exchange, Morgan Stanley vowed it would not take any profits until new investors got a 20 percent annual return on their money.
But not even the generous terms could outweigh the risk and the offering has just been pulled, a source said.
"For [Revel CEO] Kevin DeSanctis it's kind of game over for now," the first source said. "They'll have to mothball it and wait for another day."
DeSanctis, prior to Morgan Stanley's sale effort, was reportedly trying to put together an investment group.
It can't help that Atlantic City gambling revenue keeps falling, dropping 9.1 percent in the first 10 months of this year -- after posting declines in each of the previous three years, according to the New Jersey Casino Control Commission. In all, revenue is down to $3.1 billion from its peak of $5.1 billion in 2006.
Morgan Stanley, when selling the investment, projected that Revel, after construction, would generate between $250 million and $300 million in annual profits before interest and taxes, which would have surpassed the roughly $200 million generated by the Borgata.
With Revel on the rocks, it would have been a safe bet along the city's boardwalk that the Borgata's sale effort would have been boosted -- but Borgata co-owner MGM Resorts is facing bigger issues.
MGM and Boyd Gaming share equal ownership of the Borgata, and the casino regulator in March gave MGM 30 months to sell its half or to end its profitable casino partnership with Pansy Ho in Macau, due to her alleged organized crime links.
But MGM's auction to sell its stake is collapsing, the source said.
In October, MGM said it received an offer that would generate $250 million in proceeds, and Bloomberg reported the bidder was private-equity firm Leonard Green.
The PE firm is now no longer in the bidding, and it appears there are no other suitors, the source said.
MGM, even though it got 30 months to exit the stake, has only until September 2011 to handle it itself. If it fails, a trustee will sell it for them.
Morgan Stanley and MGM declined comment. Leonard Green did not return calls. This e-mail address is being protected from spambots. You need JavaScript enabled to view it
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