For several years, MGM Resorts International has declared its commitment to building an integrated resort (IR) with gaming in Osaka, Japan. Now it appears its commitment comes with qualifications.
MGM and its local partner, Japan’s Orix Corp., have built an “escape clause” into their basic agreement with the Osaka government. Per the deal, if the partners deem that market conditions do not support a successful development, they can bow out within 30 days of their certification by the central government. Applications are due by April 28; officials may certify up to three IR developments across the country.
According to Inside Asian Gaming, the clause would apply should Japan’s central government certify Osaka’s bid to develop an IR. It gives the MGM-ORIX consortium the power to cancel the contract once 30 days have passed after certification.
It also lists three conditions that must be fulfilled in order to ensure the escape clause can’t be triggered. They are:
- The reasonable expectation that Japan’s domestic and foreign tourism demand will fully recover from the Covid-19 pandemic.
- A guarantee that international competitiveness can be maintained based on the rules put in place by the Japan Casino Regulatory Commission.
- A promise to take appropriate measures to address soil contamination concerns on the proposed development site of Yumeshima Island.
The basic agreement says Osaka Prefecture will work with Osaka IR (SPC) – a Special Purpose Company jointly established by MGM and ORIX to operate an IR in Osaka – to make all reasonable efforts to determine whether the conditions will be fulfilled. However, it also specifies that the Basic Agreement can be terminated if the SPC, rather than Osaka city or prefecture, determine that the conditions cannot be met.
Osaka officials must then be informed of the decision within 60 days of certification, at which point the operators will pay a fee of JPY 650 million (US$5.6 million).
While it remains to be seen whether MGM and ORIX would seriously consider activating such a clause, or whether Osaka will win central government approval in the first place, the fact that the operators have been handed their very own “Get out of jail free” card seems highly unusual and casts further doubt over the future of IRs in Japan.
Osaka is one of three prefectures, alongside Nagasaki and Wakayama, planning to submit a bid for IR development by the central government’s April 2022 deadline. Up to three licenses can be issued under Japan’s IR Implementation Act although Osaka has long been viewed as the most likely, and possibly the only, of the three bidders to receive one.
Should it eventually become reality, MGM Resorts’ Osaka integrated resort is projected to include 2,500 hotel rooms across three hotel brands, 730,000 square feet of MICE space and tourism facilities to showcase the best of Osaka and Japan.
