Genting Miami Property Sale Falls Apart as Commercial Real Estate Risk Rises

Posted on: June 22, 2023, 12:13h. 

Last updated on: June 22, 2023, 12:22h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Genting Malaysia’s planned $1.23 billion sale of 16.5 acres of prime South Florida real estate was slated to be one of the largest commercial property transactions in the region’s history. Now, the deal is off.

Genting Miami
Biscayne Bay in Miami. Genting Malaysia’s $1.23 billion land sale there fell apart. (Image: NOAA Habitat Blueprint)

In a Thursday filing to Malaysian securities regulators, the gaming company revealed the buyer, SmartCity Miami, pulled out of the deal after Genting declined to grant the company an extension of the exclusivity period and alterations to the terms of sale.

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,” said the casino giant in the regulatory filing.

Genting put the land on the market last November after abandoning hopes of ultimately building a casino resort there. The Malaysian company also owns the Hilton Miami Downtown Hotel and the adjacent Omni Center.

Commercial Real Estate Woes May Have Hindered Genting Sale

Gaming real estate stands as an exception, but the current state of the US commercial property market is fragile, a situation exacerbated by the spate of regional bank failures seen this year.

Broadly speaking, Florida’s economy is on strong footing and the state is one of the fastest-growing in the US, but the Genting land deal may have fallen victim to weakening sentiment across the national commercial real estate space. For example, the owner of two of San Francisco’s largest hotels recently defaulted on loans, which will likely add to a string of visible commercial real estate closures in that city. Some experts believe New York’s still slack office market could be a harbinger of duress to come.

“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,” wrote Nomura analysts Tushar Mohata and Alpa Aggarwal of the Genting Miami deal

Genting noted in the regulatory document that SmartCity Miami is still interested in the land and that it will evaluate other opportunities to sell the property. The Asia-Pacific casino giant openly said it is seeking bids of $1 billion or more. By late March, it reportedly had five such offers.

Blow to Genting’s Debt Reduction, New York Plans

Had the deal with Smart City reached the finish line, Genting would have realized a $966 million profit on the Biscayne Bay land and $743 million in after-tax profit.

Those proceeds would have been directed to debt-reducing efforts and to prepare for enhancements to Resorts World New York, assuming the operator is chosen for one of the three yet-to-be-awarded downstate gaming permits there.

“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,” added the Nomura analysts.