Tokyo vs Osaka: Casino barons roll their dice
TWO American billionaires are betting on rival cities, Tokyo and Osaka, to be the first in Japan to open casino resorts - once the government gives the go-ahead to legalise casino gambling.
Japan is one of the world's last untapped gaming markets and could become the third-largest gambling destination after Macau and the United States, with annual revenues expected to exceed US$40 billion (S$50 billion), according to broker CLSA.
Lawmakers in Japan who support legalising casino gambling hope to see initial draft legislation this year, with the first resort opening by 2020.
In a race for first-mover advantage, 76-year-old Chicago real estate mogul Neil Bluhm has set his sights on the southern commercial hub of Osaka, while Las Vegas gaming tycoon Sheldon Adelson, four years his senior, is putting his weight behind a Tokyo flagship resort.
Mr Bluhm, who owns casinos in Pennsylvania, Chicago and Niagara Falls, has a net worth of US$2.6 billion, according to Forbes. The former lawyer who now heads Rush Street Gaming believes Osaka, one of Chicago's "sister cities", has the kind of flexible local government that will help drive this project, and it has "shovel-ready" casino sites.
He notes that in Tokyo, the whole process - from approval to construction - will be more complex, more time-consuming and more expensive.
While Mr Adelson has not ruled out pitching for Osaka, too, he sees Tokyo as the main prize, given its highly affluent population of 13.2 million.
The Las Vegas Sands chief executive, said by Forbes to be worth nearly US$39 billion, has pledged to spend US$10 billion as Japan opens up to legal gambling - an offer he says his rivals cannot match.
In a recent report, Morgan Stanley predicted that a Japanese casino resort costing more than US$5 billion would offer a return on investment of less than 20 per cent, as rising costs and the struggle to attract enough high-rolling Chinese VIP clients would dampen profits.
Sands, which has casinos in Macau, Singapore and Las Vegas, remains bullish about its plans for Japan, given the country's wealthy population and proximity to China.
"We are very confident in our ability to generate a return that would be satisfactory to our shareholders," George Tanasijevich, its managing director for global development, said in a phone interview. He did not elaborate.
Mr Bluhm shrugs off talk of big-money spending by his rivals. "Sometimes people like to throw big numbers around to get picked... We have been more for Osaka in the US$4 billion to US$5 billion range," he told Reuters.
He also reckons he might have an edge over the big operators in Macau - he thinks they are likely to prefer Tokyo - by working alongside local partners.
The Kansai Keizai Doyukai, a leading local business lobby, estimates that land costs in Osaka will be a 10th of those in the capital, some 250km to the north-east. And, it says, Osaka can offer a development area three times bigger than that occupied by Singapore's two casino resorts: Marina Bay Sands and Resorts World Sentosa.
The Osaka authorities have designated a 69ha plot of reclaimed land, known as Yumeshima, as the preferred resort site.
Osaka Governor Ichiro Matsui told Reuters last month that casino operators would invest US$5 billion for an integrated resort, and bear some of the costs for infrastructure such as a rail link.
In contrast, officials in Tokyo, who are already trying to prepare for the 2020 Olympics, appear to be falling behind in the casino battle.
Industry executives worry that Tokyo is too focused on getting the Olympics right. Tokyo Governor Yoichi Masuzoe, a former health minister, has yet to say whether he will seek a casino licence for the capital.
A waterfront area called Odaiba in Tokyo Bay has been touted as a preferred location, but securing enough land could be a challenge.
At present, around 14ha of land is available for sale by the city behind the headquarters of TV broadcaster Fuji Media. Doubling that would require re-zoning parks and buying land currently owned by a real estate developer and Toyota Motor, said an official in Tokyo's waterfront development division.
Last month, the department sparked concern among casino watchers about Tokyo's intentions when it said it would auction a 2.7ha plot in the Odaiba area for a 10-year lease - effectively taking the lot out of the equation for a casino resort.
In Osaka, officials say a casino would help spur development of Japan's tourism industry outside Tokyo. Osaka is just half an hour from the former imperial capital of Kyoto and the Kobe trade hub.
Other regional hubs, such as Sasebo in the south and the ageing port city of Otaru, have also said they would welcome casino plans to boost tourism. None has come as far in the process as Osaka.
While rival operators - including Melco Crown Entertainment, MGM Resorts International and Genting Singapore - are eyeing both Tokyo and Osaka, Mr Bluhm says he is already in talks with Osaka-based Japanese companies across a range of industries.
For residents such as Yusuke Sawada, a 30-year-old architect, a casino resort could be a boost for local Osaka businesses. "If casinos come, that could draw in more tourists to spend big money. Osaka has much less money (than Tokyo). We need it more."