Akihabara News (Tokyo) — The project to build a major Integrated Resort (IR) including a casino on the manmade island of Yumeshima in Osaka Bay has at certain periods appeared to be rock solid, but the most recent developments underline the fact that while its prospects for advance are reasonable, it remains on shaky ground.
In fact, one of the biggest controversies at the moment literally concerns the ground upon which the MGM-Orix resort may be built.
Public enthusiasm for the project definitely cooled near the end of last year when Osaka Mayor Ichiro Matsui belatedly conceded that local taxpayers would have to pick up an additional ¥79 billion (US$680 million) tab to strengthen and decontaminate the soil earmarked for the development.
Matsui had long insisted that local taxpayers would face no financial burden for the project beyond what had been previously outlined, only to later reveal an unwelcome US$680 million surprise.
It turned out that scientific surveys revealed both that arsenic and fluorine exceeding the standard amounts were found in the soil of the planned construction site, as well as the fact that the manmade island may be particularly vulnerable to liquefaction in the event of a major earthquake, and will need to be reinforced.
While Matsui’s effective control of the local government through the Osaka Restoration Association means that he will most likely be able to gain political approval, the Osaka City Council has nevertheless invited MGM Resorts Japan CEO Ed Bowers and Orix Executive Officer Toyonori Takahashi to appear at their next meeting on March 16 to discuss the matter.
It also emerged in February that the new basic agreement between Osaka and the MGM-Orix consortium includes an unusual “escape clause” that allows the operators to withdraw from the project later if they decide that it no longer makes financial sense for their firms, such as if they determine that the lingering impact of the Covid pandemic may cripple the IR’s future prospects.
This sort of “escape clause” is a far cry from the usual practice in the IR industry. It reflects the strong bargaining position of the MGM-Orix within the context of being the only candidate IR operator that bid for Osaka, as well as lingering concerns about Japan’s overall regulatory and taxation plans.
Should they choose to trigger the escape clause and give up their IR construction project, the MGM-Orix consortium would be on the hook for only a ¥650 million (US$5.6 million) fee, which is hardly very painful for corporations of this size.
The IR consortium is supposed to make its final decision on whether or not to proceed with the Yumeshima project thirty days after the national government licenses the casino resort (itself by no means an absolute certainty).
However, there is also provision for the local government and the consortium to delay the final decision to an undetermined, later date, meaning that, potentially, the period of uncertainty could drag on for months or even years after the IR license is received, if conditions make that seem a wise course of action.
The most recent projections call for the Yumeshima IR to open its doors in late 2029.
Panasonic, Suntory, and JR West are among the roughly twenty other companies expected to participate in the consortium, holding a combined 20% share, while MGM Resorts and the Orix Corporation each hold a 40% share.
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