Revel abandons Brookfield deal

Another inflection point in the agonizing process of trying to find a new owner for Atlantic City's $2.4 billion Revel Casino Hotel could come Friday.

U.S. Bankruptcy Judge Gloria M. Burns on Wednesday scheduled a hearing for that morning to consider Revel AC Inc.'s motion to terminate its agreement to sell its property to a subsidiary of Brookfield Asset Management Inc. for $110 million.

Revel also asked the judge to schedule a hearing to approve the sale of Revel to the backup bidder, Glenn Straub, for $94.4 million. Straub could not be reached for comment.

Melissa Coley, a spokeswoman for Brookfield, a real estate investment manager based in Toronto that already owns two casinos, declined to comment.

Is the possibility of Brookfield coming to Atlantic City really history?

Maybe not.

Revel's motion to end the deal with Brookfield could be a negotiating tactic, as most motions in bankruptcy court are, said Jonathan Hugg, a lawyer in the Philadelphia office of Clark Hill P.L.C.

"What it does is, it focuses people's minds," Hugg said.

Jon F. Hanson, Gov. Christie's top adviser on revitalizing Atlantic City, used a baseball analogy to describe the Revel situation: "It's about the last half of the eighth inning, and we'll see what the final score is."

The termination of the Brookfield deal would be effective at 5 p.m. Friday if the judge approves it. That leaves time for further negotiations.

The Brookfield deal fell apart last month over negotiations with bondholders owed $118.6 million for the central utility plant that heats and cools Revel.

The owner of the $158 million central utility plant is ACR Energy Partners L.L.C., a joint venture of South Jersey Industries Inc., of Folsom, and DCO Energy L.L.C., of Mays Landing, N.J. Revel is the plant's only customer.

ACR's $118.6 million in bond debt survived Revel's first bankruptcy last year, which wiped out $1.23 billion in Wall Street debt. That meant ACR's contract with Revel that calls for $1.7 million monthly debt and equity payments stayed in force.

Brookfield sought a break from ACR's bondholders, but failed to get it.

Revel itself has had difficulty reaching terms with ACR over payments for utilities during bankruptcy. Revel tried to get out of paying the $1.7 million debt and equity portion of its monthly invoice from ACR. There was a hearing on those utility payments Friday, but Revel and ACR failed to reach an agreement. Those payments are back on the agenda this Friday.

Negotiations with the central utility plant will almost certainly be problematic in a sale to Straub's Polo North Country Club Inc. Straub said at a court hearing in September that he would reject Revel's contract with the plant.

That means the sales process could be right back where it was with Brookfield: stuck on the question of how much of the $118.6 million owed to bondholders will be paid under a new owner.

But rejecting the current contract without negotiating a new one would ultimately lead to ACR shutting down. With no power, Revel's interiors would quickly deteriorate, destroying the building.

Hugg, the lawyer, doubted it would come to that.

"It is likely that at some point a referee is going to be appointed to pressure, cajole, persuade everybody involved into a compromise," he said.

But the destruction of Revel might not matter to Straub, who said in September that he would demolish the building if it didn't make money, just like he did with the Miami Arena in Florida.

Straub, whose best-known property is the Palm Beach Polo & Country Club in Wellington, Fla., also said he would start an elite university in the Revel building.

An Atlantic County official said he was mostly interested in there being a buyer for Revel.

"Let somebody take over. I'm not going to disparage Straub. Here's a guy that is interested. He seems to have pretty deep pockets," County Executive Dennis Levinson said.