Izek Shomof, LA Developer, Makes an $80 Million 11th Hour Bid for Revel Casino
A new player has entered the drama surrounding Revel Casino’s bankruptcy: Izek Shomof. Mr. Shomof is a Los Angeles-based real estate developer who entered an 11th-hour bid to purchase Atlantic City’s Revel Casino Hotel.
Judge Gloria Burns called for a one-week delays in the sale of Revel Casino to Glenn Straub and Polo North. The judge said she believed Revel AC could find a better deal, so she gave them the time to do just that. Revel AC’s lawyers, for their part, asked for the judge to approve the sale to Polo North, citing impatience on the part of their creditors, Wells Fargo.
Shomof’s Bid on Revel
The bid made by Shomof is $80 million, which is $2 million less than the purchase price Glenn Straub would have paid to purchase the casino. In court this Wednesday, Shomov’s lawyer argued that his client’s bid was the better one, because a $10 million deposit fee is factored into the price Straub paid. If Revel AC pocketed the deposit and sold the casino to Izek Shomov, the casino would collect $90 million total, or $101 million if you factor in an earlier $11 million deposit from Brookfield Asset Management.
Leo Pustilnikov, a partner for Izek Shomof, told NJ.com that his group prefers to let existing tenants at Revel Casino continue with their current leases. Glenn Straub in on record saying he would prefer to evict tenants. One reason an earlier purchase for Revel fell through was a lawsuit Glenn Straub had with those clients. Opposition from tenants has caused two different deals from closing, including the earlier Brookfield purchase.
Outstanding Issues in the Case
Two issues continue to throw doubt on any purchase of the Revel Casino building. One is whether Glenn Straub and his Polo North company will be forced to accepts the many former tenants the building had before Revel Casino closed its door on September 2, 2014.
The second issue is whether any new owner will be required to pay the debts the casino owes to AC Energy Partners, the energy coop which sold electricity to the Revel building for the cost of $3 million a month. AC Energy agreed to keep the building powered during the bankruptcy process, to keep mold and mildew from growing. The same company is threatening to turn off the power to the building, though, because of the costs incurred by maintaining an energy supply. Brookfield Asset Management explicitly pulled out of its purchase because it believed $3 million a month was an outrageous cost, while Glenn Straub discussed that it would be hard to make a profit with such a cost structure.
Shomof and Lahov Visit
On Thursday, Shomof paid a visit to the Revel Casino. When approached by reporters as he got out of his rental car outside the Inlet District Energy Center, Shomof quipped, “We are ready to count the money. We don’t know who to give it to.”
The LA developer came with a second partner, Danny Lahov, to inspect the Revel Casino, which opened in 2012 (and closed in 2014) after costing $2.4 billion to construct. When asked about the declining asking prices for Atlantic City real estate–including casinos and condos–Lahov told the media, “It’s a slump. It’s a good time for us to get in.”
Leo Pustilnikov spoke along the same theme on Monday, when news of Shomov’s interest in the casino first began to break. Pustilnikov said, “We would like to reopen it as soon as possible and look to possibly do some housing on unbuilt floors. We just want to reactivate the property and figure it out piece by piece. We’ve had reasonable success in acquiring properties in similar situations in Los Angeles, taking properties that were hemorrhaging cash and stabilizing them and turning them around. We would like to do nothing different here.”
When asked about his group’s plans to change the casino’s fortune, Shomov’s partner spoke about the ongoing attempt in the New Jersey legislature to pass a PILOT bill that would lock in payments on property taxes for the Atlantic City casinos at $150 million the first two years, then $120 million in subsequent years.
Echoing the sentiments of other local casino executives, Pustilnikov said, “We would like at the very least an agreement to fix property taxes on a going-forward basis for a number of years, so there is a certainty of cash flow that we could project and use toward investing in the property.”
Shomof: “It’s Quiet around Here”
Mr. Shomof was more direct, and more poignant, when he talked about the local scene around Revel Casino. “It’s a shame,” said Shomof, as he looked around the silent city landscape around Revel. “It’s quiet around here. We’re used to Vegas.”
About Izek Shomof
Izek Shomof is a well-known Los Angeles developer and the founder of Pacific Investments LLC. Through his development company, he has a string of high-priced real estate purchases in the past few years. Shomof has rehabbed the Alexandria Hotel, bought the Boyle Heights Sears complex at Olympic and Soto, purchased another residential tower at Fourth and Broadway, landed the Title Insurance condo project. One LA-area publication described Shomof as a “prolific DTLA developer”.
Besides his work in the LA real estate industry, Izek Shomof has shown an inclination to produce movies. He only has one film to his credit, the 2012 production “For the Love of Money“, about film based on a true story about a gangster who leaves his criminal career to start a new life. The film, described by one viewer as a “Jewish mob story with good production value”, was directed by Ellie Kanner and starred James Caan, Jeffrey Tambor, Edward Furlong, Paul Sorvino, and Jonathan Lipnicki.
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