On Monday, Las Vegas-based MGM Resorts International (MGM.N) Chief Executive Officer James Murren said that the company could spend close to $10 billion on an integrated resort (IR) in Japan via a publicly traded real estate investment trust (REIT) as legalization of the industry inches closer in Tokyo, according to Reuters.
Having failed for 15 years, the odds that Japan will soon allow casinos in the country have greatly improved thanks to changes in the political landscape there that could put the country in a position to benefit from the legalization of the casino industry. And according to estimates by brokerage and investment group, Credit Lyonnais Securities Asia (CLSA), legalization could amount to $40 billion annually, making the Japan market second only to the United States, as reported by the news agency.
Murren said the casino giant would spend between 500 billion yen and one trillion yen ($4.8 billion-$9.5 billion) on an IR, major resort properties that feature gaming-integrated hotels, convention facilities, and shopping space, in Osaka, Yokohama, or Tokyo. In an interview with the news agency, Murren said, “We think there would be a tremendous amount of demand, and ultimately a public listing of these types of Japanese resorts would be very appealing.”
Standing to benefit from the ban being lifted on the casino industry are rival operators such as Japanese holding company Sega Sammy Holdings Inc. (6460:JP), that is currently developing Paradise City in Incheon, and Paradise, Nevada-based Las Vegas Sands Corp (NYSE: LVS), which in 2014 said it would invest as much as $10 billion in Japan.
While concerns such as gambling addiction contribute to the 2-to-1 opposition to casinos by the Japanese public, insiders say that the political scales are beginning to tilt in favor of recent legislation that will enable the development of integrated resorts that would operate casinos and hotels. On September 29, a bill was drafted that would do just that and lawmakers confirmed their plan to introduce the bill prior to the current Diet session’s conclusion for the year.
Murren said that MGM could spend between 100 billion yen and 300 billion yen on a regional area resort possibly on the southernmost main island of Kyushu or Hokkaido in northern Japan, but that the Paradise, Nevada-based company is eyeing a metro area as its main interest.
MGM has in the past expressed its desire to invest in an IR in Japan, however, has not disclosed the way in which it would go about doing so. Murren told the news agency that he envisioned a REIT where MGM would be in control of a company, which would be responsible for investment and expenses, and would pay rent to a property company that is owned by domestic and foreign companies and private investors. He said, “That could be an interesting way to expand the level of involvement, as there are many investors who are risk averse and looking for yield and others who are more risk tolerant,” according to the report. MGM Growth Properties LLC (MGP.N), a publically traded REIT was launched by MGM in the U.S. in April. Ten of MGM’s U.S. properties comprise the REIT.
Murren went on to tell the news agency that MGM could build a resort in either one of the three locations by 2022-23.