CALATA Corp., an agribusiness firm diversifying into the casino sector, said on Tuesday it is set to receive a cash advance of P234 million from its partners, starting this month until January 2017, which will be used to secure land in Cebu for its casino resort project.
Calata’s partners in the Mactan Leisure City project are Sino-America Gaming Investment Group LLC and Macau Resources Group Ltd. (MRG).
In a reply to the Philippine Stock Exchange’s query on Tuesday, Calata explained that the P234 million cash advance of the Sino group will be invested in Calata Land Inc. and will be used to pay for the “acquisition of the land to be leased” to the Sino group’s Philippine unit Macau Leisure City Management Corp. (MLCMC).
The P65-billion Mactan Leisure City is a planned 14-hectare integrated casino, resort and hotel complex to be located in Lapu-Lapu City, Mactan Island, and is expected to be completed by mid-2020.
Calata Land is the group’s planned real estate investment trust (REIT), which is expected to own the land in Lapu-Lapu City where Mactan Leisure City will be established. This REIT will be 51 percent owned by Calata, 35 percent owned by the Sino Group, and 14 percent owned by Calata president Joseph Calata.
In consideration of the “economic benefits” to be generated from the P234-million cash advance, Calata said it will convert the cash invested into equity, allowing for the Sino group to be issued 65 million of Calata Corp.’s common shares priced at P3.60 each.
The infusion of the P234-million funds to Calata Land “is expected to commence by the third week of September and be completed by January 2017,” the company said.
The company also said this arrangement will attest to the exclusivity of the lease agreement between Calata Land and MLCMC, under which the annual rent will be equivalent to $2 million or about P95 million payable twice per year, with the first payment due 42 months from the commencement of the casino complex project.
“Furthermore, the convertibility of said investment or advance was allowed in order to attract Sino into making said investment or advance as it is expected that the value of Calata, including the price of its stock, shall increase due to the a) the acquisition of a high value land and b) expectation of substantial profit from the lease of said land to MLCMC,” Calata said in the disclosure.
Calata earlier said that once Mactan Leisure City is operational, the “rent ceiling will rise to 1.5 percent of EBITDA (earnings before interest, tax, depreciation and amortization). Current projections anticipate a $320 million EBITDA.”
The P234-million advance is part of the Sino group’s initial investment of around P836.1 million in the casino resort project.
Calata has said it plans to start construction of the project in January 2017 while it secures permits from the
Philippine Gaming and Amusement Corp. (Pagcor) and Tourism Infrastructure and Enterprise Zone Authority (Tieza).
Transactions in connection with the project are still subject to the approval of the Securities and Exchange Commission and the Philippine Stock Exchange.
Incorporated in 1999, Calata is engaged in the livestock and agricultural business, distributing agro-chemicals, feeds, fertilizers, veterinary machines, and other agricultural products.