Land values on the rise
The Philippine Amusement and Gaming Corp. announced November 10 that it will auction the land under Solaire Resort and Casino in Manila’s Entertainment City.
The minimum cash bid for two combined plots is PHP37.23 billion (US$726.6 million), according to PAGCOR. Bloomberry Resorts, which owns and operates Solaire, is entitled to match the highest bidder to claim the property. Solaire’s lease agreement lasts until July 2033 and “is extendible for another term under certain conditions,” according to the state-run regulator.
Investment bank Morgan Stanley says if Bloomberry buys the land, “the market may put some valuation premium for owning the land, which has appreciated in value (rose by 6 to 7 times in the last five years or so),” reported GGRAsia.
“The purchase may put Bloomberry’s valuation comparable to peers who own their land,” the analysts said, adding, “We expect Bloomberry to begin regular dividends in 2018, and Quezon City and Solaire Phase 2 to drive long-term growth.” Bloomberry boss Enrique Razon Jr. plans to break ground next year on a casino resort at Quezon City.
However, if Bloomberry buys the Manila land at the minimum bidding price, it “would increase the firm’s net debt by PHP37 billion (US$727.8 million) from PHP8.3 billion at end of third quarter 2017,” the analysts added. The acquisition could also “reduce return on invested capital to 15 percent from 24 percent” and reduce the expected 2018 dividend, said the Morgan Stanley team. The buy could “raise Bloomberry’s interest expenses by PHP900 million if we assume half of the consideration to be debt funded at 5 percent, resulting in net reduction on net income and free cash flow to equity by about PHP700 million or 6 percent to 8 percent,” they said.
Prospective bidders must be Philippine nationals or otherwise be authorized by law to acquire real estate in the Philippines. In case of a corporation or partnership, at least 60 percent of its capital must be owned by Philippine nationals, reported GGRAsia. Bids are due by November 27. The terms included in the announcement state that the land “is to be utilized for the purpose of developing and maintaining thereon a world-class integrated resort.”
PAGCOR did not disclose a reason behind the sale.
Entertainment City currently hosts three casino resorts: Solaire; City of Dreams Manila, operated by a unit of Melco Resorts and Entertainment Ltd.; and Okada Manila, by Japanese gaming conglomerate Universal Entertainment Corp. Philippines casino operator Travellers International Hotel Group Inc., a venture between local conglomerate Alliance Global Group Inc. and Hong Kong-listed Genting Hong Kong Ltd., is also developing a casino resort in Entertainment City, to be called Westside City Resorts World.
Razon, meanwhile, has set his sights on gaming opportunities elsewhere in Asia, reports Business World. “Vietnam and Japan are just some of several prospective jurisdictions outside the Philippines that the corporation is looking at, but there is nothing definitive at this point,” Bloomberry said in a recent filing to the Philippine Stock Exchange.
