MANILA, Philippines - Listed bingo operator Leisure Resorts and World Corp. (LRWC) handed over the management of a $1-billion integrated resort along the Manila Bay reclamation area to Macau casino operator Melco Crown Entertainment Ltd. in exchange for a share of the economic benefits to be derived from the project.
Sources said LR is likely to get a 15 percent share of the revenues from the lease of the land or casino operations.
Melco Crown, the joint venture between Macau gambling kingpin Stanley Ho and the late Australian casino-and-media magnate Kerry Packer, signed Thursday a conditional memorandum of agreement with leisure firm Belle Corp. to invest a maximum of $580 million in the casino complex that will rise within the 100-hectare Entertainment City which is touted as Manila’s equivalent of the Las Vegas strip. This would be Melco’s first foray in the Philippine gambling market, which is forecast to generate $3 billion in revenues by 2015.
The deal, however, is contingent upon the project site being registered as a tourism economic zone by the Philippine Economic Zone Authority, an agency that grants fiscal and non-fiscal incentives to developers of economic zones.
Given its lack of experience, Belle, in January 2011, tapped LRWC to operate the casino complex for a period of 10 years.
Through subsidiary First Cagayan Leisure and Resort Corp., LRWC is also the master licensor, regulator and supervisor of the Cagayan Special Economic Zone (CEZA), which now has three casinos.
Construction of the project, however, was put on hold due to financing issues, leading to the search for a foreign strategic partner.
In order to get the project going and further enhance the value of the proposed casino complex, Belle and LRWC agreed to take in Melco to “harness the latter’s expertise, global network, and resources”.
“With the entry of a foreign partner, it was agreed that LRWC and unit AB Leisure Gaming will assist Belle in funding its own capital requirements in exchange for a share in the economic benefits to be derived from the casino operation,” LRWC said in a disclosure to the Philippine Stock Exchange.
Based on its filing at the Hong Kong Stock Exchange, Melco said a final working agreement is being firmed up and is expected to be ready in the next two months.
Melco said it may secure a $320-million loan facility to partly fund its share in the casino project in Manila.
Melco said its “expansion into new jurisdictions where the company expects strong returns on capital will further diversify the company’s exposure in Asia, delivering incremental sources of earnings and cash flow.”
Asia is seen to overtake the United States as the world’s biggest gaming market, mainly driven by the increasing popularity of casinos and growing economic prosperity. Gaming revenues in Asia are projected to more than double to $79.3 billion by 2015.
“The company considers its experience in developing world-class integrated resorts such as the City of Dreams in Macau will allow it to take advantage of the anticipated growth in the leisure and tourism industries in the Philippines, which will cater to an increasingly affluent and growing Asian middle class who continue to seeking new travel destinations and experiences,” Melco said.
Aside from the City of Dreams, Melco also operates the Altira Macau. It likewise owns a chain of gaming machines under the Mocha Club brand.
A third casino called the Studio City, is in the works and is targeted for opening in 2015 with a main floor area of 465,000 square feet. Melco owns 60 percent of the project.
Analysts said the Melco-Belle deal is seen as a major boost to the government’s drive to pump prime the local economy.
Three other groups with casino licenses in the Entertainment City include port tycoon Enrique Razon’s Bloomberry Resorts Corp., Travellers Group (a joint venture between Malaysian casino company Genting Hong Kong Ltd. and property tycoon Andrew Tan’s Alliance Global Group Inc.), and Universal Entertainment Corp. of controversial pachinko billionaire Kazuo Okada.