Nomura ‘negatively surprised’ by collapse of Genting Malaysia’s sale of Miami land

• On Thursday (June 22) morning, GenM disclosed that the purchaser, Smart Miami City LLC, had decided to end its current bid after requesting an extension of the exclusivity period and amendments to the commercial terms of the Sale and Purchase Agreement — requests that GenM chose not to grant.

KUALA LUMPUR (June 23): Nomura Research said it was “negatively surprised” by the news of the collapse of the proposed  sale by Genting Malaysia Bhd (GenM) of a 15.5-acre block of land in Miami, Florida for US$1.23 billion.

On Thursday (June 22) morning, GenM disclosed that the purchaser, Smart Miami City LLC, had decided to end its current bid after requesting an extension of the exclusivity period and amendments to the commercial terms of the Sale and Purchase Agreement — requests that GenM chose not to grant.

While the company said Smart Miami City remains interested in the land, it will also continue to review other opportunities to close on a sale, while continuing to enhance its remaining Miami holdings.

Citing analysts Tushar Mohata and Alpa Aggarwal, industry magazine Inside Asian Gaming (IAG) on Thursday said that they were “negatively surprised” by the news, which would have seen GenM generate a pre-tax gain of US$966 million and a post-tax gain of US$743 million.

The transaction had been flagged as a means of funding expansion of the company’s New York City casino, should it win one of three full licences up for grabs.

“The sale, had it gone through, would have generated a large windfall for the company … and would have helped repair the balance sheet of both GenM and parentco Genting Bhd by significantly lowering net debt to equity,” the analysts said.

“While we still await clarity from management on the exact reason for the failed sale, one factor that we think which could have affected the outcome was the sharp deterioration in the commercial real estate market in the US over the past few months, and banks’ reluctance to finance large transactions, especially after the bank failures seen recently.”

IAG said while US news articles suggest that GenM will likely negotiate with one of four other companies to have initially bid for the land, Nomura commented that capital markets “remain challenging and a new buyer may have difficulty lining up financing for such a massive deal”.

GenM first purchased the land in question for US$259 million in 2011, with plans to develop a large-scale integrated resort dubbed Resorts World Miami.

However, hopes that Florida might push through new gambling legislation to allow such a development were never realised, and it is considered unlikely that any such legislation will happen in the foreseeable future.

Genting also owns the Hilton Miami Downtown hotel and the connected Omni Center.