Suncity Group Holdings, the largest junket operator in Asia, is another step closer to banking considerable profit from a new casino-hotel development being built in the Philippines. Travellers International Hotel Group has signed off on a lease agreement that will see the company control the hotel and casino at Westside City Resorts World in Manila for the next 45 years. Suncity’s SunTrust Home Developers Inc. will be the entity directly responsible for running the operations.
SunTrust became a part of Suncity last year when the latter purchased the entity’s share capital from Aurora Securities and Travellers’ parent company MegaWorld. At that time, plans were set in motion to have SunTrust lease the development, with the company being designated as the “sole and exclusive operator and manager of the Main Hotel Casino.” The recent consummation of that agreement marks the culmination of months of negotiations to ensure the multimillion-dollar resort is protected.
SunTrust is going to pay $10.6 million a year for the lease once casino operations get going. That amount, which is due in two semi-annual payments, was based on the venue’s assessed market value of $340 million. The company will also pay $184.5 million in “Right-of-Use Asset” fees and $184.5 million as lease liability. The initial lease agreement will span 20 years, ending on August 19, 2039, when it can be automatically renewed for another 25 years unless all entities involved decide to part ways.
The $340 million valuation was provided by an independent assessment firm, but the actual cost of construction is much higher. When it’s complete, and not calculating any cost overruns, $700 million will have been spent. This is to cover the 473,612-square-foot footprint that includes covered floor area of around 1.95 million square feet. The venue will offer 400 five-star hotel rooms, 400 gaming tables and 1,200 slot machines, and is expected to open sometime in the last quarter of 2022.
One of the lease contract stipulations almost certainly provides an exit strategy for Travellers should SunTrust or Suncity be found to have violated any laws and be stripped of any requisite licenses. This is common verbiage in many contracts of this nature and, while there is not any reason to anticipate problems down the road, financial regulators are taking a closer look at Suncity’s purchase of SunTrust and, depending on the results of that investigation, there could be trouble ahead.
The deal also has to be approved by others, as well. According to the announcement of the lease, Suntrust explains, “The lease agreement is subject to conditions precedent, including obtaining by Suncity Group Holdings Ltd. of the necessary approval of its shareholders to the lease agreement and the transactions contemplated thereon. It is also subject to announcement requirements of the Hong Kong Stock Exchange.”