Straub, Stockton try to get out of Showboat deal
Glenn Straub was supposed to be Stockton University's savior in Atlantic City. But three months after the Florida developer agreed to buy the former Showboat casino property, taking the troubled site off the school's hands for $26 million, he is suing the university, saying it essentially was dealing in bad faith.
Glenn Straub was supposed to be Stockton University's savior in Atlantic City.
But three months after the Florida developer agreed to buy the former Showboat casino property, taking the troubled site off the school's hands for $26 million, he is suing the university, saying it essentially was dealing in bad faith.
Straub's suit, filed Wednesday in Superior Court in Atlantic County, asked to let him out of the sale or delay the closing, which had been scheduled for Thursday. Straub still wants to purchase the property for the agreed-upon price, his lawyer said.
However, Harvey Kesselman, Stockton's acting president, said in a statement Thursday, "Given Mr. Straub's litigious background, it is not surprising he is suing Stockton, since it appears as if he has no intention of buying Showboat for the contracted price of $26 million."
Stuart J. Moskovitz, Straub's lawyer, said Kesselman was "100 percent wrong about that."
The university is considering getting out of the sale agreement and is looking for other buyers, Kesselman said.
An escape clause in the purchase agreement gave Stockton 90 days to try to untangle a complicated legal situation that blocked the university from establishing a campus on the property. The agreement also gave both sides until 1 p.m. Thursday to close the sale or end the deal.
"We will pursue the contract's remedies, which include cancellation, and we will actively seek other buyers who want to do what is best for our students, Atlantic City, and our region," Kesselman wrote.
Kesselman was not available for comment, a university spokeswoman said.
Straub's suit, filed on behalf of his KK Ventures-Atlantic City L.L.C., asks for the purchase agreement to be declared void and to at least delay settlement while awaiting resolution of Caesars Entertainment's bankruptcy case in Illinois.
Stockton has filed claims in that case after Caesars sold it the Showboat and subsequently declared bankruptcy.
Straub wants the delay so that a pair of conflicting restrictions on the site can be figured out in bankruptcy court, and so he can still buy the shuttered casino for the $26 million now sitting in escrow, his lawyer said.
If not, the suit asks for the purchase agreement to be declared null and void, with an "unjust enrichment" declaration that would give Straub the difference if Stockton sells the property to anyone else for more than $26 million.
Negotiations were friendlier three months ago.
With the university bleeding money from holding onto the property while trying to figure out the legal morass surrounding it, its then-president turned to Straub, who had purchased the Revel Casino Hotel property.
Stockton has spent hundreds of thousands of dollars on monthly maintenance and security on top of legal fees. School officials have said they cannot continue to keep the property sitting empty.
But the Showboat site is the subject of two competing legal restrictions on its usage.
A 1988 legal covenant says the property can be used only as a casino-hotel; the parent company of the Trump Taj Mahal casino next door to Showboat has threatened to enforce that restriction, citing concerns about underage students attempting to gamble.
But Caesars placed a deed restriction on the property when it sold it to Stockton in December for $18 million saying the site could be used for anything but a casino.
"You have a 1988 recorded restriction on the property, the covenant, that requires this property to be used for a casino. And when Stockton purchased the property, they agreed to a restriction that said it couldn't be used [as a casino]. Which is a little nuts," said Moskovitz.
Stockton joined the Caesars bankruptcy case because it said the casino company was supposed to resolve the covenants. When Caesars sold the Showboat to Stockton in December, the contract included protecting the university from problems surrounding the 1988 restriction.
That didn't stop the Taj Mahal from invoking the covenant, putting a stop to the school's plans. With lawmakers questioning the university's moves and public criticism piling on, school officials looked to sell the property. Enter Straub.
"I believe that this arrangement with Mr. Straub is in the best interests of both Stockton University and the city," Stockton president Herman Saatkamp said in an April statement announcing the planned sale.
"We expect to be able to move forward together under a plan that will revitalize Atlantic City, including transforming Revel, which Mr. Straub's firm purchased . . . as well as Showboat, from casinos into next-generation universities and resorts," Saatkamp wrote.
At that point, Stockton officials were still saying they hoped to open an Atlantic City residential campus in the fall. That will not happen.
Stockton had planned to convert the Showboat into an "Island Campus" for thousands of students. While many state and local officials hailed the move as a major step toward diversifying Atlantic City's ailing economy, Saatkamp came under fire for making the purchase while knowing the 1988 restriction was in place.
Faculty and staff complained of a lack of transparency in major university decisions and voted to criticize the president.
Saatkamp has since announced his resignation and gone on medical leave. Kesselman was prepared to leave to become president of the University of Southern Maine, but scuttled those plans to remain at Stockton as acting president.