The Basic Agreement between Osaka, its preferred operating partners, a consortium headed MGM Resorts & ORIX Corp, for the development and operation of an integrated resort includes an escape clause that allows the operator to withdraw if market conditions prove unsatisfactory.
The clause would apply if Japan’s central governments certify Osakas bid for an IR. It gives the MGMORIX consortium the ability to cancel the contract if the certification period has expired.
It also lists three conditions that must all be met in order for the escape clause to be activated. These conditions are:
- It is reasonable to expect that Japan’s domestic and international tourism demand will fully recover after the COVID-19 pandemic.
- Based on the rules established by the Japan Casino Regulatory Commission, there is a guarantee that international competition can be maintained.
- Promisal to take the necessary steps to address soil contamination concerns at Yumeshima Island’s proposed development site.
According to the Basic Agreement Osaka Prefecture and Osaka IR will collaborate with Osaka IR, a Special Purpose Company established by MGM & ORIX to manage an IR in Osaka. They will make all reasonable efforts determine if the conditions are being met. The Basic Agreement also stipulates that the SPC can terminate the agreement if Osaka city or prefecture decides that the conditions cannot been met.
Osaka officials will be notified within 60 days of certification. The operators will then have to pay a fee JPY650million (US$5.6million).
It is not clear if MGM and ORIX will seriously consider activating such a clause or whether Osaka will get central government approval. However, the fact operators were given their own Get out jail free card seems extremely unusual and raises further doubts about the future of IRs Japan.
Osaka is among three prefectures that, along with Nagasaki, Wakayama, plan to submit a bid to the central governments for IR development by April 2022 deadline. Osaka, although it can issue up to three licenses under Japan’s IR Implementation Act, has been considered the most likely and perhaps the only bidder to receive one.
MGM Resorts Osaka integrated hotel is expected to have 2,500 rooms across three hotel brands, 730,000 square foot of MICE space, and tourism facilities that showcase Osaka’s best.