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GTI Global Network > News > International
Saipan's USD 7B integrated resort promise starts with a casino in a shopping mall (2015/08/27)

Best Sunshine International, the Macau junket linked gaming license holder for Saipan, CNMI’s largest island, has promised a USD 7.1B integrated resort and so far delivered a casino in a shopping mall.

The casino on neighboring Tinian has been assessed $78 million in fines and forfeitures for violating US anti-laundering regulations, which may dampen the enthusiasm of casino investors viewing CNMI as not just an idyllic tropical setting to lure mainland Chinese tourists but a regulatory no man’s land, with weak local authorities and Uncle Sam far away.

Best known for World War II battle between US and Japanese forces, Saipan legalized casinos last year and took bids for a $2 billion integrated resort, there were plenty of questions about the process and prospects. Tinian Dynasty’s casino has struggled since opening in 1998, a casino on Rota, the smallest of the main islands, shut down within months of opening, and several other gaming licensees on those islands have, rather sensibly it seems, never put a spade in the ground.

Even though voters on Saipan, where about 90% of CMNI’s 57,000 population lives, twice rejected casinos, the legislature passed a casino bill in March last year after lawmakers visited Hong Kong to meet with potential investors. Governor Eloy Inos said the government desperately needed the revenue from a casino license to fund pension payments. However, the terms for casino development – a $2 billion investment and 2,000 hotel rooms for a destination that welcomed fewer than 500,000 visitors in the previous year – seemed designed to discourage interest from rational investors. The only applicants were the owners of the Tinian resort and Best Sunshine, linked to the investors that had hosted the lawmakers. To the surprise of few, Best Sunshine won the license.

Best Sunshine, a subsidiary of Hong Kong listed Imperial Pacific International and an investor in Macau junket promoter Hengsheng, has upped its bet IR to $7.1 billion, at least one paper, which would make it the most expensive integrated resort project ever, even though it’s a four hour-plus flight from the Asian mainland, The five phase development plan calls for a total 4,252 rooms, 300 villas, 1,600 gaming tables and 3,500 slot machines. Best Sunshine admits it doesn’t have a plan to finance the IR.

Interestingly, that development plan, released last September, introduced a the idea of a “town hotel” separate from the IR to launch next year with 300 gaming tables, 500 rooms and 50 rooms, with another 200 rooms to open in 2017. Gaming industry observers expected that BS would try to find a way to open a casino without building a full blown IR that likely way too costly to make sense for the market. The most common scenario was buying an old hotel, but to assuage anti-casino sentiments local authorities banned a casino in any existing building. In March, Best Sunshine signed a lease with the government for a piece of land for the town hotel, paying the $250,000 first year’s rent in advance.

But Best Sunshine had a better idea to open a casino faster. It got the casino law amended to permit a “training facility” for casino employees and rented ground floor place in the tourist focused DFS T Galleria. The training facility, in order to provide proper conditions for teaching employees, has customers betting real money. With ten tables and 48 machines around 300 employees, the $25 million temporary casino took in $500,000 in its first two days of operations in late July, according to a government official. Best Sunshine plans to ramp up the training to 44 tables, including 12 for VIPs and 106 machines.

Looking ahead, the 40 year public land lease for Mariana Resort and Spa, Saipan’s last link to its glory days of Japanese tourism before its property bubble burst, expires in 2018. Japanese owner Kan Pacific says it has been trying to extend the lease since 2013 and invest a fresh $75 million in the property and claims it received repeated assurances from the government of a lease extension. Japan is still CNMI’s third largest source of tourists behind Korea and mainland China, and the market has shown signs of life in recent months despite the end of direct air service. But, the government has decided to put the resort’s land out to public tender, and it’s likely Best Sunshine, still in search of an IR site, would be very interested. Kan Pacific says the tender decision violates lease provisions requiring five years notice. Lawyers will fight this battle of Saipan.  (| 17/08/2015, Yogonet.com/forbes.com)

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