ATLANTIC CITY — The developer of the Revel casino plans to take control of the project from Wall Street investment bank Morgan Stanley in a final push to complete the $2.5 billion megaresort.
Kevin DeSanctis, chief executive officer of Revel Entertainment Group, said he will lead a management buyout of Morgan Stanley’s ownership stake in the half-built casino as part of a new financing plan being pitched to investors.
Terms of the buyout were not divulged. Morgan Stanley’s departure will end what has been a disastrous investment in Revel by the financial giant. The company has lost nearly $1.2 billion as the casino’s chief financial backer and currently values its stake at just $40 million.
Morgan Stanley is preparing to leave at the same time that Revel and its financial adviser, JPMorgan Chase & Co., are shopping a nearly $1.15 billion funding plan to save the Boardwalk casino. Financing consists of three loans of $700 million, $295 million and $150 million.
DeSanctis described the loans as a funding package, with each piece dependent on the other. He said the most critical chunk is a so-called mezzanine loan for $295 million because it includes the new ownership structure headed by DeSanctis and other investors.
“It’s a broad group of investors,” DeSanctis said, declining to disclose any names.
DeSanctis gave bankers an overview of the financing plan during a meeting Tuesday at the Waldorf Astoria Hotel in New York. Banks now have a few weeks to decide whether they will take part in the casino’s funding.
“The reality is, these deals need to close within a few weeks in order to be successful. No deal can drag on for too long,” DeSanctis said Wednesday in an interview with The Press of Atlantic City.
As a concession to lenders, Revel now plans to open just 1,100 hotel rooms. The hotel’s sleek, 47-story tower has a capacity of 1,900 rooms. However, investors are concerned that there may not be enough demand for 1,900 rooms when the casino first opens, so Revel will start with just 1,100, DeSanctis explained. More rooms would be brought online as demand grows, he added.
For months, Revel has been pursuing about $1 billion to complete the casino’s construction. At one point, it flirted with a $1 billion deal with the Export-Import Bank of China. The project suffered a severe setback last April when Morgan Stanley, the majority owner since 2006, announced it was bailing out and would put its stake up for sale.
Revel has proposed a series of financing deals without success, but DeSanctis expressed confidence in the latest plan.
“We’ve been at this for quite a while,” he said. “With each deal you have a little more perspective. I think at this point in time we’re feeling reasonably optimistic that we can get it done.”
The loan package replaces another financing scheme just two months ago that called for two high-yield bond offerings of $800 million and $472 million. DeSanctis said there are “multiple elements” that make the loans more attractive to investors than bonds, but he would not elaborate.
“These are very complex transactions,” he said. “It’s important for people to understand that there is no sound bite to explain the deal. The deal will be successful or not.”
Revel’s quest for financing has been made even more difficult by the sluggish economy and intense competition from Pennsylvania’s casinos. With Atlantic City now mired in a four-year revenue slump, investors have been reluctant to gamble on risky casino projects.
Gov. Chris Christie has been personally involved in high-level talks with Wall Street to ignite investor interest in Revel. Christie has stressed that Revel is a centerpiece of his plans to revive Atlantic City, including the creation of a new state-run Tourism District to oversee the casino zone, beaches and Boardwalk.
“I think it’s fair to say that the governor has been incredibly supportive,” DeSanctis said. “We are very appreciative for all of his help.”
Revel would use the new financing to resume construction on the casino hotel’s interior, which came to a halt in January 2009 when money shortages began to plague the project.
“Assuming the transaction is successful, we would put people back to work very quickly and would expect to open in the second quarter of 2012,” DeSanctis said of the completion date.
About 2,000 construction jobs and another 5,000 full-time positions will be created by Revel, making it one of the biggest private employers in southern New Jersey. Labor officials are eager to put their members to work at Revel after a prolonged construction drought in Atlantic City.
“I would say that about three-quarters of the trades haven’t worked there yet. Most of those trades are running at about 40 percent unemployment,” said Will Pauls, president of the South Jersey Building Trades Council, which represents 40,000 workers and 17 trade unions.
Pauls said carpenters, electricians and plumbers will be among the army of union workers who will get jobs once Revel resumes construction on the building’s interior.
“When you start putting thousands of people back to work, that’s good for the economy of South Jersey,” he said.
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