pon the closing of the transaction, Pinnacle will enter into a management agreement through 2058 (with the potential for a 20-year extension) for the second integrated resort of the multi-phase Ho Tram Strip destination resorts project located approximately 80 miles southeast of Ho Chi Minh City, Vietnam's largest city which attracts the majority of Vietnam's 5 million tourists each year. The transaction documents provide for proportional representation on ACDL's board of directors and are subject to customary closing conditions.
The Ho Tram Strip will be Vietnam's first destination integrated resort and gaming complex and is scheduled to open in multiple phases. The multi-property resort complex is being developed by ACDL under an investment certificate from the Government of Vietnam, the first of its kind. The planned first resort of the Ho Tram Strip, MGM Grand Ho Tram, is currently under construction with a planned opening in 2013, and will be managed by MGM Hospitality, a subsidiary of MGM Resorts International.
The first phase of the MGM Grand Ho Tram will feature 541 luxury guest rooms and suites, a full spectrum of world-class restaurants and amenities, exquisite VIP accommodations, a conference center, and a spectacular entertainment area featuring 90 live table games and 500 electronic games.
The second integrated resort of the Ho Tram Strip, for which Pinnacle has secured a management agreement, will be jointly developed by Pinnacle and ACDL, and owned by ACDL. Pinnacle and ACDL expect that the second integrated resort, which will be branded as a distinct and premium resort, will be similar in project scope to the MGM Grand Ho Tram resort that is currently under construction.
"Our investment in ACDL and long-term management agreement for the second integrated resort bring meaningful strategic benefits to Pinnacle, including further diversification and potentially very significant returns on invested capital," said Anthony Sanfilippo, President and CEO of Pinnacle Entertainment.
He added: "The phenomenal success and continued strong growth of destination integrated resort and gaming facilities in Asian markets are indicative of the demand for quality gaming entertainment options in Asia. We believe this region, when measured by gaming positions per available population, has strong growth potential, especially when compared to more mature markets.”
In addition to the attractiveness of the Asian gaming market, this opportunity in Vietnam offers many appealing characteristics, including an anticipated tax structure competitive with other Asian markets with integrated resorts and high, steadily increasing tourism levels in and around Ho Chi Minh City and Ba Ria-Vung Tau Province, which make the Ho Tram Strip development the ideal project for Pinnacle to participate in the growth of this region.
"We are delighted to be a part of Vietnam's strategic vision for the further development of its tourist industry, an investor in ACDL and a partner on the Ho Tram Strip project," continued Sanfilippo. "Featuring luxurious amenities in a breathtaking oceanfront location, the Ho Tram Strip is sure to attract guests from throughout Asia. We look forward to working collaboratively with ACDL, Lloyd Nathan and the rest of their management team to develop the Ho Tram Strip."
"This transaction is another major milestone for ACDL and accelerates the development of our second resort and the entire Ho Tram site. Importantly, it builds critical mass at Ho Tram, brings a second highly respected operator into close partnership with ACDL, and enhances our plans for further growth and expansion," said Lloyd Nathan, Chief Executive Officer of Asian Coast Development (Canada). "We now have two of the world's leading gaming companies managing our integrated resorts in Vietnam, confirming Ho Tram as the next large-scale destination opportunity after Macau and Singapore. As a result of this transaction, we also now have the backing of two substantial institutional and corporate sponsors, Harbinger Capital Partners and Pinnacle Entertainment."
Nathan added, "Pinnacle joins a strong Ho Tram Strip development team, including MGM Hospitality. We look forward to working with Anthony Sanfilippo and everyone at Pinnacle on the creation of the premier gaming and leisure destination in Southeast Asia."
"Pinnacle Entertainment brings tremendous operating expertise and vision to ACDL, and we are pleased to welcome them," said Philip A. Falcone, Chief Executive Officer of Harbinger Capital Partners, a leading private investment fund and ACDL's majority investor. "We are excited about the growing list of world class operators and development partners that have joined the Ho Tram project, and we look forward as Lloyd Nathan and the ACDL team continue to build on this transaction and realize the immense potential of the Ho Tram Strip opportunity."
"We are delighted to see critical mass being created at Ho Tram and look forward to welcoming our new neighbors," said Gamal Aziz, President and CEO of MGM Hospitality. "This transaction is an important endorsement for Vietnam's growing profile as a world-class tourism destination, and we look forward to opening the MGM Grand Ho Tram in 2013."
Carlos Ruisanchez, Executive Vice President and CFO of Pinnacle Entertainment, said, "This agreement is an excellent example of Pinnacle's strategy to utilize our sound financial condition and significant free cash flow to invest in return-focused growth opportunities. The economies of Vietnam and many of the nearby surrounding countries are among the fastest growing in the world, and consumers in this region continue to demonstrate a strong propensity to visit quality integrated resort properties. We believe the characteristics of the Vietnam market, the uniqueness of the Ho Tram Strip project, our ability to participate as an owner and manager of the integrated resort, and the significant potential for gaming growth in the region will result in a very solid return on our investment."