The sale by Genting Malaysia of a 15.5-acre block of land in Miami, Florida for US$1.23 billion has fallen through, the company has announced.
In a filing to the Malaysia Bourse on Thursday morning, Genting Malaysia revealed 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 Genting Malaysia 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.
“Genting Malaysia has seen the value of its investment in Miami increase approximately 400% in just over a decade and firmly believes in the sustained strength and growth of the Miami market,” it explained.
Nomura analysts Tushar Mohata and Alpa Aggarwal said in a note that they were “negatively surprised” by the news, which would have seen Genting Malaysia 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 licenses 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 Genting Malaysia 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.”
While US news articles suggest that Genting Malaysia 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”.
Genting Malaysia 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 realized and it is considered unlikely any such legislation will happen in the foreseeable future.
Genting also owns the Hilton Miami Downtown hotel and connected Omni Center.