MGM Resorts International CEO and President Bill Hornbuckle says he expects the company’s initial investment in an Osaka IR to total no more than US$2.5 billion, likely spread over three years from 2024 to 2026.
The estimate comes after it was revealed last month that MGM and its consortium partner ORIX are planning a total investment of JPY1 trillion (US$9.09 billion), having submitted their RFP as Osaka’s sole bidder on 20 July.
Breaking down MGM’s capital commitment expectations during the company’s 2Q21 earnings call on Thursday morning (Asia time) – just hours after announcing a US$4.4 billion cash injection into the company via the sale of its stake in MGM Growth Properties – Hornbuckle said he expects MGM to contribute between US$2 billion to US$2.5 billion in cash towards initial IR development.
“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%,” he said.
“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 cheque, probably split between 2024, 2025 and 2026.”
Hornbuckle said there would certainly be further investment in the future, noting, “There is a commitment we are making to Japan and to Osaka that we would be a true partner in this.”
It is expected that MGM will be named Osaka’s operator partner before the end of the year, with Hornbuckle expressing obvious confidence in the company’s bid given the absence of any competition.
“We officially submitted our RFP as the sole bidder for the Osaka license a couple of weeks ago, which starts the clock on a three-month review process,” he said.
“We and our local partners remain excited by the opportunity which we expect will yield very attractive returns.
“We look forward to Osaka reviewing our proposal and we are hopeful and confident that we will be named Osaka’s designated operator early this fall.”