March 28, 2014

Okada group terminates deal with CPG

In a disclosure yesterday, Century Properties Group Inc (CPG) said it received a notice from the Okada group (represented by Eagle I Landholdings Inc, Eagle II Holdco Inc and Brontia Limited) that the latter is terminating the investment agreement with CPG. Based on newspaper reports, this was an offshoot of a notice of dispute raised by CPG after the Okada group wanted to make changes on the original agreement after another partner in the three-way partnership withdrew from the deal. CPG raised objections to the proposed changes and thus notified the Okada group on its objections.

It also argued that the Okada group’s notice of termination is premature as the agreement called for a 21-day discussion period to thresh out the dispute. CPG said it will exploit all its legal options to assert its exclusive rights to develop the luxury residential and commercial components of the Manila Bay Resorts project of the group.

Our take: If unresolved amicably, this may lead to a protracted legal battle between the two groups which could further delay the development of Manila Bay Resorts, one of the four integrated entertainment and gaming facility to be put up in the Pagcor Entertainment City. This should further enhance the first-mover benefits of Bloomberry Resorts Corp (BLOOM) and Melco Crown Phils Resorts Corp (MCP) which can ramp up their operations before further competition can set in and enable them to establish a strong foothold in the sector.

For CPG, this can pose a significant setback as the deal would have given it access to around 44-hectare estate within Pagcor Entertainment City where Okada’s gaming complex will be constructed. CPG is supposed to build 300,000sqm of luxury residential and retail gross floor area within the complex.

For the Okada group, it remains to be seen if it can secure a local partner to address issues on land ownership before it can proceed with the project. Otherwise, it may risk losing its franchise (one of four granted by government to private entities) to put up an integrated entertainment and leisure complex in Entertainment City.– WealthSec