Japan’s IR potential will appeal to investors

Japan’s IR potential will appeal to investors

Tuesday, August 18, 2015
JgC speaker Adam Rosenberg says that Japan is a source of "intrigue"

The potential for Integrated Resorts (IRs) in Japan will be an area of great interest for investors and financial backers, according to Fortress Investment Group’s Adam Rosenberg.

Rosenberg, Fortress’s managing director and global head of gaming and leisure within its credit funds business, will be a speaker at this year’s Japan Gaming Congress (JgC) from October 7-9. Speaking ahead of the event, he said that as one of the final frontiers for the gaming industry, Japan’s possible IR projects have been on his radar for as long as the country has flirted with introducing laws that would enable them.

With a population of 127 million sharing a GDP of $4.8trn (€4.3trn), and being situated just a short flight from China’s east coast, it is perhaps no surprise that the legislation introduced earlier this year on the future of IRs is of great interest to gaming operators and the global financial institutions that could back them.

“Japan is a source of intrigue for me,” said Rosenberg, who will participate in a JgC session entitled ‘Financing IR projects’ at JgC 2015 in Tokyo. “It’s a very interesting potential new market for land-based gaming. There are very few markets left in the world without any casinos at all that can support projects of such meaningful size and scope. There is demonstrable demand for several projects in Japan.

“It stands out and has done so for some years now as somewhere that offers real promise for large-scale casino resort development. All of these attributes attract capital.”

Many of the biggest gaming companies in the world, such as Las Vegas Sands and MGM, as well as Asian operators like Crown and Galaxy, have expressed their interest in Japan, with the market looking an even better prospect as operators deal with the decline of Macau over the last 12 months.

Rosenberg joined Fortress in 2014 after a 16-year career in investment banking at Goldman Sachs, where he spent his last nine years as global head of gaming. He has also watched the gradual developments in Japan with a keen eye, but believes that only when legislation is actually passed and site locations identified can detailed financial plans be developed as to how IRs would be built and operated.

“Finance wouldn’t be discussed in any detail at this point,” Rosenberg said. “It would be at the point where it’s clear what the project scope would be. In order for me to start that dialogue I would want to know what are we building and where, how big will it be, what will be the revenue and cash flow expectations, etc. Then you start to size and structure a capital plan around that.

“We’re pretty far away from that, but that doesn’t mean that the big operators aren’t already socialising with their investment and commercial bank contacts and letting them know that there will be opportunities they want them to think about.”

Rosenberg joined Fortress last year as the alternative asset management firm sought to utilise the experience and contacts he developed during his time at Goldman Sachs to build out its gaming and leisure investment platform. His role within the credit fund segment is to assist with existing investments and asset manage, but also to source new gaming and leisure investment opportunities globally.

“Hiring me was a sign of Fortress’ commitment to the sector and we have a real interest in putting capital to work,” he said. “In terms of Japan, I’m interested to be talking to the operators and their development partners to figure out a way that we can be part of the capital solution.

“I would imagine that gaming operators would have their investment and commercial bankers arrange debt financing for them to build these properties, and whether there’s a role for Fortress in that is uncertain. It depends on whether they can get their financing entirely from traditional sources or whether they are interested in more unique capital that would be more appropriate for us. We can be very creative in structuring flexible capital solutions.

“My guess is that the operators likely to be involved will have access to traditional capital sources, but a capital provider such as Fortress may supplement that. Fortress also has a team in Japan specifically focused on the Japanese property markets, so those funds are also interested in how the IR story develops from here.”

While Rosenberg is unsure at this point as to what involvement Fortress – which has around $70bn in assets under management – will have in the Japanese IR sector, he said that the company has a number of exciting opportunities involving land-based casinos and gaming technology businesses around the world on its radar. 

“We are looking at casino resort opportunities, perhaps similar to those that are being discussed in Japan, in the Caribbean, Latin America, Europe and Asia,” Rosenberg said “These include construction projects and existing properties in markets that are very appealing to us.

“I’m currently more interested in opportunities outside of the US. It’s slim pickings for us there at present as capital is relatively cheap for what is a relatively mature gaming and leisure sector.”

* The Japan Gaming Congress takes place at the Mandarin Oriental Hotel, Tokyo from October 7-9. For more information visit www.japangamingcongress.com

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