Atlantic City’s Failed $2.6 Billion Casino Rolls the Dice
(Bloomberg Businessweek) -- The Revel hotel and casino was sitting empty last year on Atlantic City’s boardwalk, a bleak symbol of real estate failure rather than the glittering resort it was built to be. Bruce Deifik decided to take control of it sight unseen.
Deifik, a property investor based in Denver who’d never been to Atlantic City, got a call in May 2017 from a friend seeking $5 million to help two developers revive the casino. Four days later, he agreed to double that amount and take over their effort. By January he was the majority owner, part of a group with $200 million on the line.
Now he’ll see if the gamble pays off. The Revel has been refurbished and renamed Ocean Resort Casino, opening on June 28. Deifik is trying to overcome the history of a $2.6 billion property that was conceived more than a decade ago by Morgan Stanley to offer an antidote to the old, dark, smoke-filled casinos further down the boardwalk. The Revel ended up going bankrupt twice, done in by its high debt load, design miscues, and competition. “I’m either the world’s biggest moron or I’m reasonably intelligent,” says Deifik, 63. “I’m not working with funds that have unlimited deep pockets. This is our family. We take this very, very seriously.”
Deifik says he’s borrowed against his other properties and invested pretty much all his liquid resources in the casino. He’s doing so in a struggling gambling market where developers, including Donald Trump, have failed spectacularly. The Ocean Resort is opening the same day as the Hard Rock Hotel & Casino, a $500 million redo of the former Trump Taj Mahal, adding thousands of rooms to the city. “It’s going to be swimming up against the current when it opens,” says Alex Bumazhny, an analyst with Fitch Ratings.
Gray-haired and stocky, with a Long Island accent—even though he hasn’t lived there since he was 12—Deifik is a character cut out for Atlantic City, a tough talker who also worked in the casino business in Las Vegas. He fist-bumps workers and greets many by name. His manner is a far cry from the buttoned-up ethos of Kevin DeSanctis, the former Steve Wynn lieutenant who developed the Revel with the backing of Morgan Stanley and other Wall Street companies. DeSanctis, who couldn’t be reached for comment, envisioned the resort as a playground for New York jet-setters, where gambling was just one of many amenities.
The timing was disastrous. Construction began shortly before the start of the 2008 financial crisis, and Morgan Stanley lost $1.2 billion on the project. The Revel opened in 2012, only to close two years later. Florida developer Glenn Straub bought it in 2015 for $82 million, but says he gave up after disputes with local officials. Enter Deifik, whose company and family office, Integrated Properties Inc., owns several million square feet of office, retail, and residential real estate, in places including Colorado, Phoenix, and Las Vegas. “He’s a really calculating and savvy risk-taker,” says Tim Richey, a broker with CBRE Group Inc. in Denver who says he’s worked with the developer for almost three decades.
Deifik says his experience buying down-and-out Denver properties enabled him to see opportunity in the Revel, gaining an asset that cost billions to build for cents on the dollar. “I felt that the Atlantic City market was coming back in a big way,” he says. With additional renovation costs, he and his partners are on the hook for $377 million, with about half that in the form of a loan from JPMorgan Chase & Co.
Ocean Resort is designed to attract a broader range of clientele. A space that used to be a poker room is being remodeled with pool tables, air hockey, and computers for video games to draw millennials. Actor Mark Wahlberg will open a Wahlburgers restaurant and a bar tied to the show he produced, Entourage. The resort is also hosting the Gameacon esports convention in October to lure fans of competitive video gaming. Deifik is opening up a once narrow entrance to the casino from the boardwalk that he says discouraged access.
He says he doesn’t have the “arrogance” of previous owners, who were looking to attract clients seeking a resort experience. The idea wasn’t crazy: Las Vegas casinos rely less on gaming revenue than Atlantic City’s do. But Deifik says the Revel emphasized the resort side at the expense of casino customers. Initially, at least, it didn’t have a VIP lounge for high rollers, nor did it have food choices aimed at its Asian players, inexpensive dining options, or a smoking area. It required customers to stay at least two nights. “If I have a room in inventory and you want to spend one night,” Deifik says, the only thing to say is, “ ‘Thank you for coming! I’m so happy you’re here! And can I get you something to drink?’ ”
One big change since the last time someone tried to make a go of the Revel is sports betting. New Jersey began allowing wagers this month after a U.S. Supreme Court ruling paved the way. Ocean Resort has reached a deal with London-based William Hill Plc to build a $6 million sportsbook at the center of the casino to attract guests coming for college basketball’s March Madness, the Super Bowl, and other games in the beach resort’s off-season. “This is a huge boost, particularly for the former Revel,” says Raymond Lesniak, the onetime New Jersey legislator who led the charge for sports betting. “They’re more designed for the people who stay long weekends.”
Yet the challenge of attracting more visitors to Atlantic City remains. Gambling revenue in the city has fallen by half since it peaked in 2006, and the number of casinos in operation has dropped from 12 to seven, not including the Ocean and the Hard Rock. There’s competition from nearby New York, Pennsylvania, and Maryland. Years of urban renewal efforts haven’t erased the city’s reputation for blight and crime.
Ocean Resort must reach out to customers beyond New Jersey and the mid-Atlantic to places such as Georgia and the Carolinas that don’t have similar resorts nearby, says Steve Norton, a casino consultant who spent much of his career working in Atlantic City. “I’ve got my fingers crossed,” he says. But Atlantic City casinos “keep overlooking where their customers are coming from.”
Deifik knows he’s taken on a challenge. “Unless you’re really 100 percent dedicated, 24 hours a day, a property like this—as beautiful as she is—it will kill you,” he says. “It will take you down.”
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