Imperial Pacific unveils casino, but delays persist

Imperial Pacific’s highly anticipated multi-billion dollar resort on the island of Saipan is planning to hold an opening on March 31, though it's unclear if anything will actually open. While soft openings are common, with Okada Manila for example starting limited casino operations in December ahead of a full unveiling, also on Friday, in this case construction delays and labor issues continue to plague the site.

Some sources say the casino facilities won't be ready until mid-April with others adding it’s likely to be closer to August for the casino and the rest at a later date.

A visit to the property highlights the problem. Tower cranes remain in full operation even into the small hours of the night. While various heavy equipment vehicles drive in and out of the 140,000-square meter area, a mainly Chinese labor force is working all out in a push to finish the project.

The Hong Kong-listed company beat rival Marianas Stars Entertainment for a license to operate a casino on Saipan in 2015. Shortly after winning the permit, it pledged to double its investment in CNMI to about $7 billion, raising concerns about the sustainability of the project.

The company has been operating a temporary casino at T Galleria, a luxury shopping mall right across from the location where the 373-room hotel is being built. The facility was to help fund the construction of the new resort and to provide a live training facility. The location, with just a handful of tables, has been generating on average about $2 billion in VIP roll a month since it opened in November 2015, far exceeding most observers’ expectations. However, its license expires at the end of April.

The new resort was supposed to open on January 28, just in time for the Chinese Lunar New Year of the Fire Rooster. However, it was pushed back due to unforeseen events since the CNMI government, represented by the Commonwealth Lottery Commission, and IPI signed the casino lease agreement (CLA) in August 2014.

The initial gaming facility will have 193 gaming tables and 365 slot machines, which is a significant increase compared to the 48 tables and 141 slot machines at their temporary facility.

Imperial Pacific Chairman Mark Brown has written to CNMI Governor Ralph Torres to request amendments to the CLA and for an extension of deadlines for the implementation schedule. According to the CLA, Imperial Pacific would be charged $100,000 per calendar day for any delay.

The first reason given for the delay was the devastation caused by Typhoon Soudelor in 2015. Brown said no one was spared when the storm barreled through Saipan causing major damage to homes, buildings, and other infrastructure, including power, telecommunications, and water. Soudelor, one of the strongest tropical cyclones to hit the CNMI since Typhoon Kim in 1986, also had an impact on the company’s construction site in downtown Garapan.

“At the starting phase of construction, [IPI] had one heavy equipment Auger and two Pile Drive machines. The Auger was used to drill holes up to 60 feet into the ground so the Drive Pile machines could drive the piles for another 60 to 130 feet as part of the [initial gaming facility’s] foundation. The Auger was extensively damaged during the storm rendering it inoperable,” wrote Brown on the letter.

Construction supplies also became limited, especially concrete cement, forcing Imperial Pacific to import from neighboring Guam and from mainland China to meet construction demands.

Geological testing done by the lone geological testing company on Saipan also failed to highlight the unique ground conditions at the site resulting in damage to the piles that were driven into the ground, delaying the start of construction.

Labor and immigration issues have also plagued the Hong Kong-listed operator, as the CNMI lacks an available skilled workforce for a huge construction project of this kind. The company had to use foreign workers under the CNMI-Only Nonimmigrant Transitional Worker Visa Program or CW1, which is a temporary working permit given to qualified alien workers and is renewed annually.

Dewatering issues, air rights agreement for tower cranes, inclement weather, the length of time to execute a public land lease for Garapan, and Mariana Resort’s lease expiration were the other reasons listed by Brown.

The first request set out by the company is to extend the operations of its temporary casino at T Galleria. IPI’s lease for its temporary casino is scheduled to expire next month on April 30 and it is asking for a six-month extension up to October 31. It is also requesting to extend the deadline for completing the construction and opening of their initial gaming facility from August 11, 2017 to February 11. 2018.

IPI’s project is not limited to Imperial Pacific Resort as they also have two more developments, Phase I and II of their multi-billion dollar investment in the CNMI. Phase I and II will be built at the location of the three-decade old Mariana Resort & Spa, another hotel on Saipan, in the northern part of the island that has an expiring lease on April 30, 2018.

IPI is asking for an extension to complete its Phase I from February 11, 2018 to May 1, 2030 and Phase II from August 11, 2022 to May 1, 2030.

Local officials seem inclined to back the company to protect its investment on the island.

Governor Torres along with House Gaming Committee chair Representative Joseph P. Deleon Guerrero, and Senator Sixto K. Igisomar, who was the Lottery Commission director when the CLA was signed, are all in favor of extending the deadlines. They believe certain considerations should be made to support a major investor like IPI.

“We want to grant and extend IPI’s request for reasons that we cannot avoid. I already asked the Lottery Commission to give [IPI] the extension they needed and they are going to meet to look into the request. The commission would look into the extension request and what are the requirements that need to be made. It was unfortunate that a strong typhoon hit us in 2015,” said Governor Torres.

“It is a project that you see is progressing every day. “You can see construction activity and they have been working extremely hard. They are trying to work 24 hours to meet the deadline.”

Representative Deleon Guerrero added IPI is clearly showing that they have been working around the clock in completing the multimillion dollar project. “We know that when they were starting construction, Saipan was hit by Typhoon Soudelor. All of us know how long it took the island to get back to its feet.”

“I think there should be some sort of consideration made for that. Secondly, I think there were some issues with regards to leasing the public land over there. The negotiations took a while and I don’t think the applicant should be penalized. When there could have been delays on the government’s part to approve the lease agreement.”

Igisomar also encourages further discussion on deadline extensions. “IPI’s extension request should be reviewed. We can’t delay any response and we must act on it. Any delay would be additional burden that we could not afford. The idea is for them to follow the timeline as much as possible. There are a lot of factors we must consider.”

“There’s Typhoon Soudelor, and CW1 and H1 [visas] issues. We cannot just say ‘you’re late, get out.’ There should be an extension. Understanding the cause and reason would be the communication between the government and [IPI]. Collaborate and make a decision when it comes to [IPI’s] request.”

Ratings firms have already expressed concern about the impact of the delays on the firm’s ability to complete the project. Moody’s downgraded Imperial Pacific’s credit ratings in January.
“The delay in the opening of the casino will weaken the company's cash flow generation compared to Moody's original expectation, and make it more difficult for it to raise the necessary funding to complete the entire Grand Mariana project,” the ratings agency said.

“A delay in the completion of the entire Grand Mariana project could also heighten the risk of cost overruns and a termination of the company's gaming license.”

The company has been seeking to raise funds through a bond issue.