Last Updated on May 31, 2023 by Nouman kaleem
On April 27, 2022, Osaka Prefecture applied to the national government for an “area development plan” to attract integrated resort facilities, which was accepted. The contents are that the construction will be ordered from the spring to summer of 2023, and the business will open from the fall to winter of 2029. It is a huge facility with a casino, theater, museum, and restaurant, centered on a conference room with a capacity of more than 6,000. The total number of guest rooms in the hotel is 2,375-2,760. Although it is inferior to the 3,679 Shinagawa Prince Hotel, which has the largest number of guest rooms in Japan, it is the second largest hotel in Japan.
Osaka Prefecture estimates that the sales of the entire IR business in the third year of its opening will be 520 billion yen and the net income will be 75 billion yen. Of that, 80% of the revenue comes from casinos. Casino sales will be 416 billion yen. This scale is comparable to the sales of 464,450 million yen in the fiscal year ended March 2020 before Corona of Oriental Land Co., Ltd. <4661> , which operates Tokyo Disney Resort. Is there a chance of winning?
The following information is available in this article:
・ Overview of casino resort
・ Financing method for initial investment
・ Balance plan
MGM and Orix invest 212 billion yen each
Yumeshima is planning to attract casino resorts in Osaka Prefecture. It is an artificial island that was the target of the Technoport Osaka project to develop a new city center in 1988. It is called a negative legacy due to the bursting of the bubble economy and the failure to bid for the Olympics. Yumeshima is undeveloped land with a large collection of containers and vast vacant lots. Osaka Prefecture and Osaka City will have huge debts due to the Technoport Osaka Project.
If the casino is successfully attracted, the land utilization of Yumeshima alone will generate an annual income of approximately 2.5 billion yen.
The land area planned to be attracted is 49 hectares. The city of Osaka, which owns the land, plans to collect a monthly rent of 428 yen / ㎡ for IR companies. 210 million yen a month, 2.5 billion yen a year. The lease period is 35 years after the land is delivered. A real estate income of 88 billion yen will be obtained in 35 years.
However, it is essential to take measures against soil pollution and liquefaction on the land of Yumeshima. Osaka Prefecture will bear 78.8 billion yen as the cost required for land improvement. In addition, Osaka City plans to invest 27,225 million yen in infrastructure development for the 2025 Japan International Exposition to be held in Yumeshima.
The core companies of casino resorts are Japan MGM Resorts (Chiyoda-ku, Tokyo) and ORIX <8591>. Of the initial investment of 1.8 trillion yen, we plan to raise 550 billion yen by borrowing and 530 billion yen by investing. The investment ratio will be 40% for MGM, 40% for ORIX, and 20% for minority shareholders.
MGM Resorts is an integrated resort facility management company headquartered in Las Vegas. According to industry analysis, Deal Labs, owns a 51% stake in MGM China, which operates a casino in Macau and has the largest share of the casino in the world. Osaka Prefecture chose MGM as an investor because it has ample liquidity on hand ($ 6.4 billion as of the end of September 2021) and has a business plan that can generate sufficient cash flow.
ORIX has liquidity and a track record of nationwide operating three Kansai airports, Umekita town development, Osaka Dome operation, ORIX HOTELS & RESORTS, etc. Osaka Prefecture selected these two companies as prospective operators in September 2021.
The effect of the business is that the annual number of visitors is 16.1 million, and the annual sales are 520 billion yen. According to the two companies proposals, Osaka Prefecture and Osaka City will receive 110 billion yen annually (payment of about 77 billion yen, admission fee of 33 billion yen).
The annual number of visitors to USJ in 2016 was 13.9 million. We are expecting more people than that. The average customer price at Tokyo Disney Resort is around 14,000 yen, but at Casino Resort, it is 32,000 yen by a simple calculation. With the casino effect, you plan to drop far more money than Disney Resort.