Melco International Development chairman Lawrence Ho has confirmed the existence of a deal to build the first resort-casino in Russia’s fledgling entertainment zone outside Vladivostok. Initial reports of the deal to build a casino in the Primorye region just north of the border separating North Korea and China were dismissed by Melco communications staff as “market speculation,” but Ho confirmed the deal’s existence on Wednesday. Contrary to other speculation, the deal does not involve Melco Crown Entertainment, Ho’s joint venture with Australian casino operator Crown Ltd.
Under the terms of the deal, Ho’s Summit Ascent Holdings Ltd. will acquire a 46% stake in the casino project, while Melco International will hold a further 5%. The remaining 49% will be controlled by Oleg Drozdov and Aleksey Simanchuk, two Russian developers the Wall Street Journal described as having no prior casino experience. Ho has been named non-executive chairman of Summit Ascent with immediate effect.
The project’s first phase is expected to cost $130m and feature a 120-room hotel offering 65 gaming tables (25 VIP, 40 mass market) and 800 slot machines when it opens in September 2014. The proposed $500m second phase is expected to consist of a further 500 rooms, 170 tables and 500 slots, plus entertainment and conference facilities.
The parties are reportedly still dotting the i’s and crossing the t’s with OJSC Nash Dom Primorye, the state-owned firm overseeing the development of the Primorye entertainment zone. Nash Dom Primorye will also serve as Summit Ascent’s landlord, although it and other casino firms that build in the region will have the option to purchase the land outright once their projects have finished construction.
Despite the Primorye region’s proximity to China and its tax authorities offering the most generous rate of any Asia-Pacific casino region – an estimated 3% to 7% compared to Macau’s 39% – interest in Primorye has been slack. Cambodia’s NagaCorp and William Weidner’s Global Gaming Asset Management (GGAM) are reportedly negotiating deals with Nash Dom Primorye, but other operators have expressed concern over Russia’s reputation for governmental shenanigans. Transparency International’s recent global corruption barometer ranked Russia 133rd out of 176 countries in terms of perceived corruption and over 70% Russians felt their country’s approach to ethical transactions was beyond repair.
