NagaCorp has changed its mind about building an integrated resort in Russia. It had already begun construction of its development in the city of Vladivostok, but Russia’s invasion of Ukraine is canceling those plans.
Two years ago, NagaCorp was completely behind plans to bring gaming to Russia’s Primorye Gambling Zone. It saw huge possibilities for the area as a premier destination, and was ready to sink millions of dollars into seeing it grow.
As Vladimir Putin continues his attacks against Ukraine, NagaCorp is washing its hands of the country.
NagaCorp Out of Russia’s Far East
NagaCorp announced yesterday that it was suspending construction of its planned integrated resort “indefinitely.” While a suspension usually means a resumption at a later date, that doesn’t necessarily appear to be the case now.
The company didn’t specifically call out the war as the reason for the suspension. However, the timing of the withdrawal is enough to reach that logical conclusion.
Adding that it will provide more updates in the future as necessary, NagaCorp indicated that it wants to invoke the “force majeure clause” that its investment agreement offers. That clause will allow it to halt development of the property, as well as potentially permanently walk away.
The Cambodian casino operator, which is also facing issues domestically, earmarked $350 million for the Russian project. It also agreed to spend millions more to assist in the development of a railway system in the area.
Right now, there is a lot of uncertainty when it comes to operating in Russia because of the sanctions and retaliatory sanctions. I am guessing management would like to adopt a wait-and-see approach,” asserts Terry Ng of Daiwa Capital Markets.
The hotel tower skeleton was already in place, with the roof slab being fitted, according to a company update from last month. It added at the time that it expected to complete the mechanical, electrical, and plumbing work before the end of this year.
Ukraine War an Excuse to Exit
Some industry insiders believe NagaCorp might be using the war in Ukraine as nothing more than an excuse to pack up. Tim Shepherd, director of casino investment firm Fortuna Investments Worldwide, asserts that Vladivostok has been a “headache” for the company. He adds that the Ukraine conflict “has now given them the option” to drop it, according to Nikkei Asia.
There are two casino resorts in Vladivostok, and neither is living up to expectations. Tigre de Cristal was the first to open. However, its ties to the casino’s owner, former Summit Ascent Holdings Chairman Alvin Chau, have been an issue. Chau was arrested late last year by Macau police.
The other property, the Shambala, opened in October 2020. It came as tourism began to find some traction following COVID-19. However, it hasn’t lived up to expectations.
Although revenue rose from 2020 to 2021, last summer the property became the target of bankruptcy rumors. Subsequently, it found a way to resolve its financial disputes.
With travel restrictions and sanctions now in place because of Russia’s invasion, neither property is likely going to find a great deal of support.
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