A consortium including Las Vegas-based casino operator Caesars Entertainment Corp has paid into an escrow account an initial US$10 million deposit toward the cost of land for a major gaming resort near South Korea’s Incheon International Airport, Steven Tight, president international development for Caesars, confirmed to GGRAsia.
It is the first phase of a process that Caesars hopes will enable it and its partners to break ground by early next year on a multi-phase scheme described in a filing by one of the other consortium members in March as costing an initial KRW855 billion (US$845 million).
A condition before moving to the development phase will be that the consortium gets approval from Incheon Development & Tourism Corp – the body charged with urban redevelopment and economic growth in the area – for the design of the resort. Mr Tight said the authorities there are seeking an “iconic” structure or series of structures.
The investors hope to complete the approval phase within eight months, with a possible first phase opening in 2018.
In order to pursue the project, the consortium needed to achieve an investment grade credit rating within South Korea. This has now been granted, the executive confirmed. A factor in the decision might be Caesars’ decision to commit US$100 million in a non-escrow bank account in South Korea for use in the project. That cash commitment was confirmed to GGRAsia by Mr Tight. It is in addition to the US$50 million capitalisation of the joint venture company, taking the aggregate capital injected so far by the partners to US$160 million.
In April, Standard & Poor’s Ratings Services lowered its rating for Caesars Entertainment to ‘CCC-’ from ‘CCC+’, keeping it at ‘junk’ grade. In March, Moody’s Investors Service said at the time that Caesars’ casino operations unit, Caesars Entertainment Operating Company Inc had a “total debt load of nearly US$21 billion”.
The other partners in the Incheon casino resort consortium are Indonesia’s Lippo Group and Singapore-based real estate developer OUE Ltd, which is 55 percent owned by Lippo Group, according to Moody’s.
Reuters reported in March that the equity allocation between the consortium partners in the joint venture, known as LOCZ Korea Corp, would be 40 percent from Caesars, 40 percent from OUE and 20 percent from Lippo Group. Mr Tight declined to confirm the contribution arrangements.
But given Lippo’s interest in OUE, if the Reuters numbers are correct it would imply on a pro rata basis an aggregate 42 percent contribution to the project from the Indonesian firm.
In January, Moody’s rated a real estate investment trust in Singapore sponsored by OUE at ‘Ba1′ – one notch below investment grade. In April, Standard & Poor’s rated Lippo Group’s Indonesian house building unit PT Lippo Karawaci Tbk at ‘BB-’, i.e., roughly equivalent to the OUE REIT’s rating.
The casino consortium in March won a preliminary licence to operate a gaming resort at Yeongjong Island (pictured) part of Incheon Free Economic Zone.
The scheme was described in March in an OUE Ltd filing to Singapore Exchange Ltd as an KRW855 billion scheme with gross floor area of more than 150,000 square metres (1.61 million square feet) on a 4.3-hectare (10.6-acre) site.
The partners have not yet disclosed final numbers of tables and slot machines for the resort. But given its proximity to the airport, it is expected that Chinese and Japanese tourists will be the target market. Only one of South Korea’s 17 casinos is open to players holding only a South Korean passport.
Gross gaming revenue in South Korea totalled US$2.7 billion in 2013 according to the research arm of Malaysia’s CIMB Bank.
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”The project [in South Korea] continues apace in terms of detailed design, where we have now reached the 90 percent threshold”
Chief executive of U.S. tribal casino operator Mohegan Gaming and Entertainment