Orix Opens Wallet to Get Osaka IR off the Ground

Orix Corp is one of the Japanese partners in MGM Resorts International’s Osaka integrated resort (IR) development. Each will own 40% of the scheme, with a group of companies from the Kansai region taking the remaining 20%. Hitomaro Yano, chief executive officer at Orix, stated late last week that the company’s initial investment in the JPY1.08-trillion ($9.50 billion) scheme would be approximately JPY200 billion. This is roughly $1.76 billion.

Orix Welcomes Osaka IR Opportunity

According to Bloomberg Japan, Yano spoke on Thursday after Orix published its quarter-end results. He stated that Orix’s initial contribution would be paid by cash on hand. Yano added that about half of the Osaka IR’s total cost would be paid by non-recourse loans. These loans can be secured by collateral, usually property.

Bloomberg reports that the Osaka scheme’s 20% interest includes France’s VINCI Airports. According to VINCI’s corporate site, VINCI has a Kansai International Airport management contract. Kansai Electric power Co Inc, Kintetsu Group Holdings Co Ltd, Panasonic Corp, and other Kansai-affiliated businesses.

In late July, Osaka authorities stated that the likelihood of the IR opening at any time between 2028 and 2030 was possible.

Japan IR Countdown Continues

In October, the Japanese government announced that it had opened the application period for local authorities seeking to host a casino resort. It also revealed the weighting it would give for such requests.

In the first phase of the liberalization program, three resorts are allowed to be located in the country. Currently, there are only three communities that could host a large-scale IR. These are Osaka and Nagasaki.

MGM Resorts International CEO Bill Hornbuckle told investors in August that the company was ready for a US$2.5 billion initial investment in Osaka IR. This will be paid over three years, starting in 2024.

“The program with ORIX is 40-40-20, meaning a consortium with other Japanese companies will make up the 20%. If not, [MGM and ORIX] both fill to 50%. If we call the project US$10 billion, although we think it will be a little lower, with 55/45 debt to equity, that means for us it’s a US$2 billion to US$2.5 billion check, probably split between 2024, 2025 and 2026.”

MGM, Orix and Osaka city and prefecture will submit an area planning plan by April 2022.

When Orix was asked about the forecast returns for the IR, Orix said that its current calculations looked forward “over several years considering inbound visitors, but currently, we are planning for a scenario on the premise of only Japanese visitors. Some will talk about 10, 20 or any multiple of years, but the calculation is based on an IRR (internal rate of return) of at least 10%. MGM has estimated numbers double our calculations, but we are not planning for that. We will use our conservative numbers to seek Japanese investment and consider how to reach that number with only Japanese customers.”