Morgan Stanley bows out of Atlantic City project

NEW YORK (Reuters) - Morgan Stanley is bowing out of the Revel casino in Atlantic City, a move that will result in a "substantial loss" of its $1.2 billion investment in the partially built property.

The financial services company said in a filing on Thursday that its board authorized a "plan of disposal" for Revel Entertainment Group, LLC, a subsidiary of Morgan Stanley that has been developing the beachfront casino-hotel on the boardwalk.

"The company will consider various alternatives to effect the full disposition of Revel, which may include a direct sale to a third party or an auction process," the company said.

Morgan Stanley did not say why it was withdrawing from the project in its filing with the U.S. Securities and Exchange Commission. The company was not immediately available for comment.

The bank's departure comes as Atlantic City faces stiff competition from slot parlors in neighboring states. The $2 billion Revel casino was widely viewed as a project that would lure more gamblers and tourists to the city.

But the project, which began in 2007, has faced challenges. In January 2009, Revel slowed construction on the project, focusing solely on the exterior, and laid off workers.

(Reporting by Deepa Seetharaman; Editing by Jan Paschal)