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Leisure & Resorts World to invest P3 B in Sy-led casino venture

By Zinnia B. Dela Peña (The Philippine Star) Updated July 09, 2012 12:00 AM

MANILA, Philippines - Leisure & Resorts World Corp. (LRWC) will invest as much as P3 billion in a $1 billion casino venture with Sy-led upscale leisure developer Belle Corp. and Macau casino firm Melco Crown Entertainment.

LRWC turned over to Melco the task of managing and operating the integrated casino and hotel complex Belle is building within the 100-hectare Entertainment City along Manila Bay, in exchange for a share in the project’s earnings.

LRWC was originally supposed to manage the casino and split EBITDA (earnings before interest, taxes, depreciation and amortization) evenly with Belle for a 10-year time frame. Belle and LRWC, however, decided to amend their earlier arrangement to make way for the entry of Melco.

Sources said LRWC is likely to get a maximum 30 percent share of the lease rental payments to be made by Melco to Belle for the casino property.

Aside from that, LRWC is expected to get up to 15 percent of the casino’s revenues.

Sources said LRWC would invest up to P3 billion in the entertainment complex, which will come from a combination of cash and debt.

LRWC was tapped by Belle in 2011 to handle the gaming component of the integrated resort given the latter’s lack of gambling experience. Formerly Atlas Fertilizer Corp., LRWC operates professional bingo and interactives games licensing at the Cagayan Economic Zone Authority.

The Sy family’s flagship company SM Investments Corp. is involved in five core businesses – retail merchandising, mall operations, property, banking and hotel and leisure.

Belle was initially looking at teaming up with US-based Harrah’s Entertainment Inc., which owns over 50 casinos under the Bally’s, Caesars, Horseshoe and Rio brand names but talks bogged down. Belle eventually picked LRWC as its partner for the project.

The huge financing requirement and the Philippine Amusement & Gaming Corp.’s requirement for a minimum 800-room hotel to be in place before casinos could operate within the Entertainment City, hindered the development of the project, prompting Belle and LR to find a foreign strategic partner.

Belle may have found the perfect fit in Melco, which has placed a large bet on expanding to one of the world’s emerging casino markets. Melco expects to invest up to $580 million over the course of project.

The project, located in an area that is envisioned to become the Philippines’ version of the Las Vegas strip, would be Melco’s first outside Macau, where it operates the City of Dreams and Altira Macau casinos. The company is developing its third casino, Studio City, which is slated for opening in 2015.

Melco said it was entering the Philippine gaming market because the country is a popular tourist destination and close to major sources of tourists including South Korea, Taiwan, Japan and China.

Melco said it wanted 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 seek new travel destinations and experiences.”

Gambling revenues in Philippines are forecast to grow from $1.3 billion in 2011 to $3 billion in 2015 once four new resorts are completed.

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.

The biggest of the four projects is a $2 billion casino-hotel complex being built by Okada, which is targeted for completion in 2014.

Bloomberry has hired Las Vegas-based Global Gaming Asset Management to operate its $1 billion Solaire Manila casino-hotel complex, construction of which will be completed next year.
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