Hong Kong-listed Guangzhou R&F Properties Co Ltd says one of its subsidiaries has entered into an agreement with Caesars Korea Holding Co LLC to create a joint venture “to develop, own and operate” a casino resort in Incheon, South Korea.
Caesars Korea Holding Co LLC is a firm wholly owned by U.S.-based casino operator Caesars Entertainment Corp. Guangzhou R&F Properties develops, sells and leases property in mainland China. The Hong Kong-listed company also provides property management and hotel operation services.
In December 2014, GGRAsia reported that a consortium including Caesars Korea and Lippo Worldwide Investments Ltd – a unit of Hong Kong-listed real estate developer Lippo Ltd – had made a conditional deal to acquire land for a casino project at Incheon, for just under US$95.9 million.
Lippo Ltd had announced on August 19 a “memorandum of implementation” for the proposed disposal of its stake in the project to a joint venture entity to be formed by Caesars Korea and an unidentified independent third party investor. Lippo Ltd said in November that it was still in talks with Caesars Entertainment for the disposal of its stake in the proposed gaming joint venture in Incheon.
Construction for the casino project has not yet started, according to several investment analysts covering the gaming sector.
In a Monday filing, Guangzhou R&F Properties said that upon completion of the agreement, its subsidiary R&F Properties (HK) Co Ltd and Caesars Korea would each have a 50 percent interest in the joint venture company. The joint venture would then acquire LOCZ Korea Corp, the firm responsible for the development, construction and operation of the integrated resort.
The agreement contemplates an initial equity contribution by each of R&F Properties (HK) and Caesars Korea in the amount of US$30.5 million to the joint venture company. It also contemplates potential further equity contributions by each of the investors in the amount of up to US$110 million in cash. These further equity contributions would be made in four tranches, according to Monday’s filing.
Guangzhou R&F Properties said the group intends to fund its commitment via its internal resources. The company said it expects the initial deal to set up the joint venture to be concluded until March 10, 2017.
The joint venture will be engaged in the development and operation of the casino resort in Incheon. The casino will be managed by a related entity of Caesars Entertainment, said Monday’s filing.
The casino resort will be located in Midan City, in the northeast part of Yeongjong Island – one of the three regions under the Incheon Free Economic Zone. Midan City is described as being close to the Incheon International Airport (pictured).
The filing confirmed that South Korea’s Ministry of Culture, Sports and Tourism granted a preliminary licence to LOCZ Korea on March 17, 2014. Such licence stated that the company had received conditional approval “for a foreigner-only casino business licence, subject to compliance with certain conditions”.
“Caesars and R&F (HK) will pursue the grant of the final licence by the Ministry of Culture, Sports and Tourism upon completion of the construction of the integrated resort,” said Guangzhou R&F Properties.
As currently proposed – but subject to modification – the project is to include 720 hotel rooms, a foreigner-only casino, a conference centre, restaurants, retail, live entertainment venues and a performance theatre. Construction is expected to be completed by 2020, according to Monday’s filing. The document did not include information regarding the total investment required for construction.
“The joint venture with Caesars provides an opportunity for the group to further enhance its capabilities in the development and operation of entertainment focused integrated resorts in addition to creating a strong foothold in [South] Korea for future real estate development opportunities,” said Guangzhou R&F Properties.
In the filing, Guangzhou R&F Properties stated that it had also been able to secure an additional land plot adjacent to the casino resort “that will allow the company to build residential projects”.
South Korea currently has 17 casinos, but the country’s nationals are only allowed to gamble at one of them – Kangwon Land in an upland area of Kangwon province.
A total of three large-scale gaming resorts – all featuring foreigner-only casinos – have been announced for Incheon, near South Korea’s capital Seoul.
The other two projects are: the Inspire Integrated Resort scheme, by U.S.-based Mohegan Tribal Gaming Authority in partnership with South Korean chemicals manufacturer KCC Corp, and also involving Incheon International Airport Corp, scheduled to begin operations by 2020; and Paradise City, by South Korea’s foreigner-only casino operator Paradise Co Ltd and Japanese pachinko operator Sega Sammy Holdings Inc, to open in April 2017.
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President of the Mohegan Inspire Entertainment Resort in South Korea