Pagcor sets $1-B ante for gaming complex

REPORT FROM BUSINESSWORLD INVESTORS EYEING a priority government project aimed at positioning the country as an Asian gaming haven need to pony up at least $1 billion to participate. Recently issued terms of reference (ToR) for the Bagong Nayong Pilipino Manila Bay Integrated City — formerly called Entertainment City Manila — state that firms wishing to apply for licenses to run integrated casino-entertainment complexes must submit proposals with a minimum project cost of $1 billion, consisting of both equity and debt. Of the total project cost, a minimum of $400 million must be invested during the first phase of the project, the Philippine Amusement and Gaming Corp. (Pagcor) said. "They must be have a plan to spend at least $1 billion. We feel that is an appropriate cost because it is the same amount being spent in other resorts," Pagcor spokesman Dodie King told BusinessWorld. The floor amount, he said, would guarantee that applicants for Pagcor licenses have the financial capability to operate the facilities. "We just want a guarantee that they will pursue the project they will put up, that is why the terms of reference calls for at least $400 million in investments to be made in the first phase of the project," he said. The initial phase of the project involves approximately 40 hectares of reclaimed land along Manila Bay in Parañaque. Other locations in the vicinity could also qualify with Pagcor approval. The ToR states that full implementation could boost Pagcor’s income to $1.5 billion annually from $500 million, which in turn would add to the National Government’s coffers. Pagcor released the ToR last month, indicating that the gaming firm was ready to accept applications for permits to operate casinos and entertainment facilities. Mr. King said that so far, seven groups from the United States, Europe and Asia have expressed interest. He declined to be more specific. The terms of reference also require each application to be accompanied by a non-refundable manager’s check amounting to $50,000. Applicants must also have "a well-established experience" in the hotel and gaming business. Financial companies can apply for permits, "but will be required to engage qualified hotel and gaming operations entities [whether organizations or individuals], who have the track record in organizing and operating world-class hotel and gaming projects." All project proponents must have a minimum debt to equity ratio of 50% equity and 50% debt to "assure the project’s financial viability." Pagcor said the number of licenses to be issued would be flexible and would depend on the number of applicants who conform to the ToR. Upon receipt of the license application, Pagcor will immediately review and evaluate the project. It will issue a decision within 30 days after receipt of the application. Applicants who propose to own the land should meet the constitutional cap on ownership — that the firm should be 60% Filipino-owned. Firms which opt to lease Pagcor-owned land may be 100% foreign-owned. The lease period has been set at 25 years, renewable for another 25, while the annual lease rate has yet to be set. Upon approval of the project application, the proponent must submit a bank guarantee, letter of credit or surety bond "to guarantee the completion of the project", to be secured from a "reputable firm acceptable to Pagcor". Grant of a provisional license requires the proponent to open an escrow account of a minimum $100 million. In lieu of this, Pagcor said it will accept an actual investment of $100 million in the project at the time of the application. Once gaming operations start, Pagcor will impose several fees in lieu of all taxes with reference to gaming revenues. For "non-junket table and slot machine operations", these are 10% of gross revenues from "high roller" tables (those with a minimum bet of $10,000), 25% of gross revenues from "non-high roller" tables and slot machines, and 2% of gross revenues from both high roller and non-high roller tables "for the restoration of cultural heritage". For "junket operations", the fee is 10% of gross gaming revenues. Prospective license applicants, in submitting their concepts, must detail the company’s profile (highlighting its experience in casino development and operation); consularized company registration, articles of incorporation and bylaws; accomplished directors’ and officers’ personal history statements; organizational set-up; financial profile including audited financial statements for the last three years of operation; and bank certification on the availability of adequate credit facilities. The business plan must address the following Pagcor objectives: boost tourism/increase influx of tourists, generate jobs, and create economic impact. The proponents must indicate the projected number of tourists, number of jobs to be created and sourced in the Philippines, and earnings for government, aside from indirect benefits and advantages. Local hiring should be 95% for the whole hotel entertainment complex, and salaries should be in US dollars. The business plan must also include long-term development and expansion programs, target foreign markets and marketing plan, and the positioning of complex in the region as compared to Singapore or Macau and other countries. "The general concept is the creation of a destination that will attract not just gaming enthusiasts but also business tourists and leisure travelers as well; the concept must be unique," the Pagcor said. "Key components must include the establishment of tourism facilities such as theaters, exhibition halls, museums, and other tourism-oriented facilities. The concept must also include staff house/s for the casino employees." Foreign gaming firms have had discussions with Pagcor regarding the proposed Entertainment City. Among those said to have visited were Malaysia’s Genting International, which is building a $3.4-billion integrated casino resort in Singapore’s Sentosa island, US-based Wynn Resorts Ltd., and Storm International BV. Tim S. Shiah, consultant to Wynn International Chairman Jack Binion, was reported to have said that Wynn could invest at least $500 million up to $1.5 billion for an integrated hotel-casino-resort. Paul Michael Boettcher, chairman of Storm International B.V. which operates at least 30 casinos in Russia, has also been reported as expressing interest in the Philippines. Pagcor’s Mr. King said ground breaking for the Entertainment City could be held before the end of the year. The project will likely be finished after two years, he added. He said the project might expand to 800 hectares, given proposals to continue building over water.