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Osaka Prefecture Assembly Backs MGM Integrated Resort Bid
By Jeff Osienya Mar 26, 2022 IndustryThe planned MGM-ORIX integrated resort venture in Yumeshima Island moves a step forward after the prefecture assembly in Osaka voted in its favor. All eyes are now on the national government to give the final okay.After a prefectural General Assembly meeting on Thursday, March 24, Osaka legislators finally approved a development plan for an Integrated Resort (IR) in that Japanese community. The planned IR will be built by MGM Resorts International through MGM Japan, in partnership with ORIX Corporation, a financial services company.
The two partners plan to invest 40% each in developing the IR on Yumeshima Island of Osaka. This is meant to bring in more revenue for the city and turn it into a tourism hub recognized worldwide, offering competition to properties in the likes of Sin City and Macau. The majority of the 75 out of 84 house members who gave the nod for the project to move forward came from the Osaka Restoration Party, Liberal Democratic Party, and the Komeito Party.
The Osaka IR project initially had a budget of just under $10 billion. However, the cost has inevitably increased as inflation rates continue to affect every aspect of businesses and personal lives. The remaining 20% is supposed to come from the city and a few other investors, a factor that has raised a few flags here and there in recent months. Nonetheless, with the prefecture’s legislation officially on board, the next step would be to convince city and national officials. Osaka’s prefecture and city selected MGM Resorts and ORIX Corp as the city’s official Integrated Resort partners back in September 2021.
Sinking Island Concerns
Yumeshima Island, the location of Osaka’s IR project, is an artificial island popularly known as the ‘Dream Island’ in popular culture. However, recent reports indicate that the island is sinking, raising stability questions among some lawmakers and residents. Fortunately for the developers, the Basic Agreement signed in February contains an escape clause that can be invoked in the case of different unfriendly circumstances.
Such circumstances include unsatisfactory market conditions and the failure of the Japanese foreign and domestic tourism industries to recover successfully from the Covid-19 pandemic. Additionally, the escape clause will be applicable if the Japanese government fails to adequately address soil contamination issues at the proposed site and surrounding area.
MGM and ORIX are also aware of the concerns over the sinking of the manmade island, but they already have a solution as they forge ahead with the venture. The duo has vowed to ensure that they will design the massive IR in such a way that the structural integrity of the island won’t be compromised.
ORIX Executive Director Toyonori Takahashi commented on this, saying,
Quote“[Yumeshima] is already sinking. We are now conducting additional boring surveys. The next step is to figure out whether or not we can design a building that the island can withstand based on the expert findings. We have no intention of giving up, but there may come a time in which it is unavoidable.”
Public Opinion Roadblock Sidestepped by the City Council
Despite some opposition from residents and some legislators, it appears that nothing will stop the MGM-ORIX IR project. Osaka’s City Council recently voted in favor of the IR District Development Plan and shot down a referendum that would have potentially introduced a burden of unfavorable public opinion. The final decision now lies in the hands of the national government, and the deadline for submitting bids is April 28. If approved and the central government issues IR licenses to the development partners, ground-breaking is set for 2023, with completion expected in the autumn of 2029.
The plan entails a 770,000 square-meters estate that will host the MGM Osaka, MGM Villas, a retail space, conference facilities, Yumeshima Theater with 3,500 seats, and MUSUBI Hotel with 2500 guest rooms. When MGM entered Japan in 2014, the international casino operator made it clear that it intended to introduce integrated resorts into the country. Following the legalization of casinos in 2018, it set up a permanent office in Osaka. Upon market maturity, annual sales are projected to hit a cool $4.7 billion, which will in turn cascade to pumping revenue into the city’s coffers and Japan as a whole.
Two More IR To Be Constructed in Nagasaki and Wakayama
There is a provision for three such facilities, with the other two being proposed in Nagasaki and Wakayama prefectures. The venture started in 2018 when Japanese lawmakers approved a bill that would allow casinos to operate in the country. Tokyo and Yokohama were among the top picks for the ideal location of two of the three casino resorts to be developed in the forthcoming years.
Tokyo has been hesitant in joining in on the opportunity even though most experts consider it one of the best spots for an integrated resort casino development. On the other hand, Yokohama quit the race last year August after the election of a new mayor. Eventually, it was Osaka, Nagasaki, and Wakayama that won bids for the development of the integrated resorts within their localities. Still, there is some speculation that Tokyo may reconsider its previous stance once other project starts to bear fruit on completion in the coming decade.
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