GamblingCompliance: Crown Resorts Out Of Alon Project; Developers Seek New Financing

20TH DEC 2016 | WRITTEN BY: CHRIS SIEROTY

Crown Resorts’ decision to sell its stake in Alon, a $2bn resort planned for 35 acres on the Las Vegas Strip across from Wynn Las Vegas, has garnered mixed reactions from analysts over whether those who remain invested in the project will be able to find new financing.

Crown, along with Oaktree Capital Management and Andrew Pascal, CEO of Alon Las Vegas, purchased the site in 2014 for about $260m, or around $7.42m an acre.

John Knott, executive vice president of CBRE Group’s global gaming group in Las Vegas, believes Pascal will be able to find new investors.

“Based on the quality of that site and the opportunity for someone to participate in Andrew Pascal’s development vision, I would not be surprised if a new capital partner comes to the table,” said Knott, whose firm specializes in commercial real estate.

But Alex Bumazhny, a gaming analyst with Fitch Ratings, was not as confident.

“We think finding a backer could prove difficult,” Bumazhny said. “If you look at standalone projects not linked to established gaming database or brand over the past few years, they’ve had pretty lacklustre returns.”

The last standalone resort built on the Strip was The Cosmopolitan of Las Vegas, a project that was purchased out of bankruptcy and completed in 2010 for $3.9bn by Deutsche Bank.

The Cosmopolitan never posted a profit under the ownership of Deutsche Bank.

The German bank hung out a gigantic for-sale sign on day one and finally sold the resort in May 2014 to Blackstone Group for $1.73bn, after reportedly asking $2bn for the property.

“There are larger U.S. regional gaming operators who strategically could benefit from more presence on the Strip, but may hesitate to spend over a $1bn on an ultra high-end resort to accomplish that,” Bumazhny said of the Alon property.

Bumazhny said there are other Asian gaming companies, such as Melco Crown, that may look to establish a Las Vegas footprint, but as more operators continue to target Asian play, “an argument for another baccarat-centric Strip resort is hard to make.”

The Alon project is on the former New Frontier casino site, which is also adjacent to the $4bn Resorts World Las Vegas development.

“If a decision were made to sell the property, it would garner worldwide notice given its location,” Knott said.

Resorts World is being built at the site where the Stardust resort stood until it was imploded by Boyd Gaming Group. Resorts World owner Genting bought the 87-acre site in 2013 for $350m after Boyd halted construction at the onset of the recession.

The other Asian-centric casino is The Lucky Dragon Hotel and Casino, which opened just off of the Strip on December 3. The casino has tried to position itself as an “authentic Asian cultural and gaming experience.”

“While new capacity has historically been a positive for the Strip because it helps to drive demand, the current situation is a bit different,” Bumazhny said. “Strip operators are still digesting the glut of supply that came online in 2007-2010 with hotel utilization being below the 2007 peak.”

Bumazhny added that the rate of return on newer developments has underperformed return rates for redevelopment projects such as Caesars Entertainment’s Cromwell and Linq projects.

Pascal, a former Wynn Resorts executive, and his remaining partners are developing a 3.4m-square foot, 1,100-room resort.

Alon was slated to feature a 26-story tower and a 17-story tower; a man-made lake; about 27,800 square feet of casino space; 84,800 square feet for conventions; bars, restaurants and retail.

“Alon Las Vegas will continue to explore all of its options to advance the project and optimize the value for its stakeholders,” Pascal and Alon’s other developers said in a statement.

Messages left Monday with Pascal were not returned.

Pascal and his team have spent two years in the planning, designing, development, pre-construction and entitlement process.

“The Alon resort project has been thoroughly vetted and is considered ‘shovel-ready,’” the Las Vegas-based company said. “The Alon team is comprised of an accomplished and diverse group of industry experts, all of whom remain committed to the project and to realizing the best possible outcome.”

Crown, which is led by Australian businessman James Packer, announced last week that it had suspended work on the Alon and may sell its investment in the project.

The gaming company also announced it was reducing its 27.4 percent stake in Melco Crown Entertainment and its investments in the Philippines to concentrate on the Australian market.

Crown additionally sold 13.4 percent of outstanding Melco shares to chairman Lawrence Ho’s investment company, along with monetizing another 14 percent of Melco shares.

“While [Crown] was a founding shareholder of [Melco Crown], it had become a passive shareholder, with [its] representatives having stepped backed from operational and executive roles over recent years,” said Wells Fargo analyst Cameron McKnight.

In his research report, McKnight wrote the sale “is not a call on Macau,” but did not comment on Alon.alon_website_holding_page_image_1_0

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GamblingCompliance: Casino Giants Cheer Japan IR Approval

14TH DEC 2016 | WRITTEN BY: CHRIS SIEROTY

Leading international casino companies have cheered the approval of integrated resorts legalisation in Japan, a market that brokerage firm CLSA estimates could be worth more than $30bn a year.

Japan, the world’s third-largest economy, is set to become home to casinos in the form of integrated resorts (IR) after enabling legislation passed a final vote in parliament Wednesday.

Although Japanese corporations are expected to form a significant part of a future casino market, international companies such as Las Vegas Sands, MGM Resorts, Caesars Entertainment, Genting, Hard Rock International, Melco Crown and Wynn Resorts have all declared their interest as well.

“Our company has long been interested in the possibility of developing an integrated resort in Japan, so we are excited and encouraged by the recent progress,” Sheldon Adelson, CEO of Las Vegas Sands, said in a statement emailed on Tuesday to GamblingCompliance.

Adelson said that if given the opportunity, “Las Vegas Sands is prepared to make an unmatched investment in Japan”.

Adelson has previously said he is willing to spend as much as $10bn to build a resort in Japan.

“And we have the track record of success in Asia and financial capability to do exactly that,” Adelson said.

“A Las Vegas Sands integrated resort in Japan would embrace and emphasize the important customs and cultural history of the nation, while being so unique and remarkable in its design and offerings that it would attract leisure and business tourists from around the world and change the future of the tourism industry in the country,” Sheldon Adelson of Las Vegas Sands said.

Steve Wynn, chairman and CEO of Wynn Resorts, has also said he would be willing to spend $10bn on an integrated resort in Japan. MGM Resorts CEO Jim Murren recently put the figure at $4.8bn to $9.5bn.

Meanwhile, Caesars Entertainment has had Japan on its radar for more than a decade.

“We are extremely interested in Japan,” Jan Jones Blackhurst, vice president government relations and corporate responsibility at Caesars, told GamblingCompliance on Tuesday.

“This time they will get over the final hurdle,” Jones Blackhurst said. “We think this is an extraordinary opportunity and are very interested in partnering to build a world class (integrated resort) in the Japan market.”

Jones said partnerships would be crucial because it would allow Caesars to “fully understand the market … and culture”.

Still, foreign gaming corporations will encounter a raft of cash-rich Japanese corporations, from railroad companies to theme park operators, all eager to themselves participate in the new market.

According to credit agency Moody’s, the total amount of cash held on the balance sheets of Japanese non-financial companies at the beginning of last year was about JPY30.5trn (US$255bn), up 15 percent from a year before.

Casinos are currently banned in Japan, but the government permits gambling in other forms, including lotteries and wagering on horseracing. Pachinko, a Japanese version of pinball, can be played at shops nationwide with winners exchanging prizes for cash.

In a research report, CLSA valued Japan’s existing gaming market at more than $30bn.

However, CLSA analyst Jay Defibaugh noted the IR market itself could “exceed $30bn after completion of regional roll-outs,” which are expected to follow a more limited number of signature casinos in major Japanese cities.

Exactly how many IR licences will be available is set to be clarified via follow-up legislation considered next year that will also map out such other critical factors as investment criteria and tax rates.

It is currently unclear where casinos will be allowed.

“We continue to believe that the two major metropolitan areas of Tokyo and Osaka will each be awarded at least one licence, with the possibility of multiple licences issued for smaller-scale IRs outside of these two major metros,” said Grant Govertsen, an analyst with Union Gaming in Macau.

The imminent approval of IRs in Japan even resonated yesterday as far away as Brazil, where another major casino expansion is under consideration.

Testifying during a marathon hearing on expanded gambling in Brazil’s Congress, a senior executive with Las Vegas’ Station Casinos urged policymakers to look no further than Japan’s decision to restrict its gaming market to casino-resorts and reject any accompanying approval of bingo halls, online gambling or other offerings.

Japan has zeroed in on IRs because of their proven record in boosting tourism and creating significant employment, said Tobin Prior, Station Casinos’ executive vice president of international development.

“I’m not sure why Brazil would want anything different,” Prior said.