Sands to MGM Scout Casino Sites in Japan as Tokyo Gets Games

Las Vegas Sands Corp. (LVS) and MGM

Resorts International (MGM) are scouting sites for casinos in Japan as
Tokyo’s selection to host the 2020 Olympics boosts confidence a

law legalizing gambling resorts in the capital will pass.

The International Olympic Committee’s decision fueled

speculation Japan will approve casino gambling since the

development would add hotel capacity and entertainment venues

that could be used during the games. Casinos would also add jobs

and draw about $10 billion in sales to bolster the economy.

Tokyo’s potential as a gambling market is also drawing the

interest of Caesars Entertainment Corp. (CZR) and Melco Crown

Entertainment Ltd. (MPEL) The push comes two years after casino

legislation aimed at generating revenue to help rebuild after

the 2011 tsunami faltered.

“We are starting to think through designs and master plans

and partners we think would be most appropriate and really

starting to invest more heavily in this effort,” Steven Tight,

president for international development for Las Vegas-based

Caesars, said in an e-mail. He declined to quantify the

company’s investment or name potential partners.

Among the potential local partners are trading companies

such as Mitsui Co. (8031), Mitsubishi Corp. and Itochu Corp. and

gaming machine makers Sega Sammy Holdings Inc. (6460) and Konami Corp. (9766)

The trading companies have project-finance experience and real

estate development connections, while the game makers have

helped develop casino projects and technology outside of Japan.

Partner Search

Sega Sammy jumped the most in three months, gaining 7.6

percent to 2,530 yen as of the close in Tokyo trading. Konami

climbed 6.2 percent, more than double the 2.5 percent gain in

the benchmark Nikkei 225 Stock Average.

SJM Holdings Ltd. (880), Asia’s biggest casino operator, is

interested in partnering with a local investor to set up a

casino in Japan, Chief Executive Officer Ambrose So said last

week in an interview.

“We can bring technical know-how to a local partner in

Japan,” he said, adding that the company would prefer Osaka

over Tokyo as the Japanese capital city is already too crowded

and doesn’t offer much land for large development.

Japanese construction companies and real estate developers

may also benefit from construction of integrated resorts.

Builders in Japan have soared this year, partly on speculation

they would win contracts for the planned 153.8 billion yen in

Olympics-related projects around Tokyo.

Share Gains

Taisei Corp. (1801), Japan’s most valuable general contractor,

jumped 14 percent today. Mitsubishi Estate Co. (8802), Japan’s biggest

property company by market value, and Taisei have doubled in

market value in the past year. Yomiuri Land Co. (9671), an operator of

amusement parks and golf courses, has more than tripled in the

same period.

Sega Sammy, the video game and pachinko machine company

that is developing a casino resort near South Korea’s Incheon

airport with Seoul-based Paradise Group, is also a potential

partner. Cash and near cash rose to 176.5 billion yen at the

Tokyo-based company as of March 31, the highest fiscal year-end

figure in at least eight years, according to data compiled by

Bloomberg.

Konami, which also produces arcade games and gambling

machines, has also boosted gambling equipment and systems to

about 13 percent of revenue as of the quarter ended in June,

compared with 7 percent in the quarter ended June 2009.

Tokyo Olympics

Japan’s capital beat Madrid and Istanbul to host the Summer

Games, its second following the 1964 Olympics, the IOC said in

Buenos Aires.

Plans to revitalize Tokyo’s infrastructure and ensure

adequate accommodations for visitors add impetus for approving

gambling resorts, which include hotels and entertainment

facilities.

“Victory for Tokyo’s Olympic bid will be beneficial for

legislation to legalize casinos,” said Jay Defibaugh, an

analyst at CLSA Asia-Pacific Markets in Tokyo. “We have all the

ingredients to make it happen, so anything that gets the

administration to put a high priority on casinos versus all the

other issues they’re dealing with is good.”

Japan is likely to legalize casinos in October or November,

said Defibaugh and Aaron Fischer, also an analyst at CLSA. The

specific details about sites and operators will probably come

later. That would set the stage for gambling resorts to open by

2019 or 2020, the analysts said in a report earlier this year.

Casino Bill

Takeshi Iwaya, the ruling-party lawmaker who heads a group

set up to promote casino legislation said in June he intends to

submit the bill this autumn.

Preparation for the Games in Tokyo adds to expectations for

casinos that had already been rising after Shinzo Abe, whose
Liberal Democratic Party is viewed as favoring legalization,

became prime minister in December.

“What you’ve seen since the Abe administration has come in

is they have put strong leadership on these issues,” George Tanasijevich, chief executive officer of Sands’ Singapore

operation, said by e-mail last week. “I feel quite optimistic

about it.”

The Olympic Games themselves would have an economic impact

of about 2.96 trillion yen and create 150,000 jobs for Japan,

according to an estimate from the Tokyo 2020 bid committee in

June 2012.

Revenue Generation

Casinos would generate about $10 billion a year when a

second large-scale resort in Osaka is included, Defibaugh and

Fischer of CLSA estimate. Adding revenue from smaller gambling

facilities in other cities could push Japan past Nevada to

become the world’s largest gambling hub after Macau.

Grant Govertsen, an analyst at Las Vegas-based Union Gaming

Group, also expects casinos to generate about $10 billion a

year, given Japan’s population and wealth.

As the world’s third-largest economy, Japan is Asia’s

biggest untapped casino market, while operators plan gambling

resorts across the region, including in Manila, Sri Lanka and
Vietnam.

“Practically overnight it should be the No. 2 gaming

market in the world, second only to Macau,” Govertsen said by

e-mail last week. “We believe it will quickly surpass

Singapore, and surpass Manila quicker still.”

Union Conference

MGM and Sands are among those scheduled to make

presentations at a conference Union Gaming is hosting in Tokyo

Sept. 17-19 in Tokyo, according to the Las Vegas-based casino

consultants’ website. Japanese legislators including Iwaya have

also confirmed attendance, according to the website.

Sands, meanwhile, has begun considering potential locations

for a Japan resort. Possible sites include the Odaiba section of

Tokyo, an island of reclaimed land in Tokyo Bay, between Haneda

airport and the business district surrounding the city’s main

train station.

“There are specific locations we have been focusing on,”

said Tanasijevich, who declined to name the sites.

MGM Resorts International is also preparing to team up with

a consortium of Japan-based companies to prepare for a possible

bid should casinos win legalization, Ed Bowers, the Las Vegas-based company’s senior vice president for hospitality, said in

an e-mail.

“We have been meeting with various potential local

partners,” Bowers said, without identifying any.

Operators with experience in Singapore may have an edge in

winning a Japan project, given the government has indicated it

wants experience with integrated resorts, or IRs, jargon for

facilities that offer more than just gambling tables.

“The two Singapore IR licensees, Las Vegas Sands and

Genting Singapore have probably been a little more vocal about

Japan than their peers,” said Govertsen of Union Gaming. “They

are likely the front-runners for the big licenses. However, all

major international gaming operators are extremely interested in

Japan and already have teams in Japan laying groundwork.”

To contact the reporters on this story:

Jacob Adelman in Tokyo at

jadelman1@bloomberg.net;

Yuki Yamaguchi in Tokyo at

yyamaguchi10@bloomberg.net

To contact the editors responsible for this story:

Frank Longid at

flongid@bloomberg.net;

Stephanie Wong at

swong139@bloomberg.net

Enlarge image

Japan Casino School

Tomohiro Ohsumi/Bloomberg

Gaming chips are placed at a roulette table at Casino Venus, a mock casino operated by Japan Casino School and Bright Inc. to provide the gambling experience, in Tokyo.

Gaming chips are placed at a roulette table at Casino Venus, a mock casino operated by Japan Casino School and Bright Inc. to provide the gambling experience, in Tokyo. Photographer: Tomohiro Ohsumi/Bloomberg

Sands to MGM Scout Casino Sites in Japan as Tokyo Gets Games