By Blake Schmidt & Yoojung Lee / Bloomberg
SOMETIMES, all you need is a private jet.
Soon after property tycoon Yang Zhihui bet his fortune on luring Chinese gamblers and investors to a giant casino-resort project in South Korea, his ambitions were threatened by an economic war that flared up between the two nations.
Yang not only weathered the political spat over North Korea’s nuclear program, but his massive project expanded and his company announced this month it would build another casino in the Philippines.
How Yang managed to keep the dream alive has a lot to do with his days as a property agent during China’s booms years, the profit he reaped from flipping one of James Bond’s old gambling haunts, and a Bombardier Global 6000 jet bought for $53 million in 2013. It also shows why Asia’s gambling expansion continues unabated, despite China’s economic slowdown, a looming trade war and Xi Jinping’s crackdowns on corruption and cash exports.
In November 2016 Yang’s company signed a deal to buy out its partner, Genting Singapore PLC, in the $2.4-billion project on South Korea’s Jeju island, a holiday haven for honeymooners about the size of Maui and an hour’s flight from Seoul. At the time, Chinese visitors were the fastest-growing part of the island’s economy, which relies heavily on the attractions of its volcanic scenery and mild climate.
That all changed when South Korea decided to install the US Thaad missile defense system after being spooked by North Korean leader Kim Jong Un’s warlike rhetoric and weapons tests. China objected and ordered travel agents to stop selling tour packages to South Korea in March 2017, according to the Korean tourist bureau. Airlines cut the number of flights to the peninsula and Chinese visitor numbers slumped.
That’s where Yang’s jet came in.
Yang bought the 19-passenger Bombardier in 2013, and had his company lease it from his British Virgin Islands-registered company, Win Rich Group Ltd., to fly around management, wealthy property investors, high-rolling gamblers and himself, according to company filings. It was a brash move by a chairman who’d just succeeded in getting a Hong Kong backdoor listing, but years later it turned out to be a lifeline for his Jeju Shinhwa Resort, after his listed company Landing International Development Ltd. bought the jet from him.
The aircraft became a link between Jeju and the wealthy clients Yang cultivated during his ascent as a property developer, as well as others coming to the casino, which officially opened in February. Yang didn’t provide details about the jet’s usage other than that it’s strictly for business purposes. Travelers that don’t join tour groups have been less affected, he said.
“Free travelers are generally not affected, and they have higher spending power,” Yang said in replies to questions sent by e-mail.
Yang’s majority stake in Landing International gives him a net worth of more than $1.6 billion, according to the Bloomberg Billionaires Index. That fortune grew after Landing almost doubled its money in less than two years on the sale of the famous London casino, Les Ambassadeurs in Mayfair, the location shown for Sean Connery’s immortal introduction as “Bond, James Bond.” Landing said it sold the property for HK$2.5 billion ($320 million).
With money from the casino sale, rights issues and funding from his China-based property group, Yang went all-in on Jeju. Landing said to date it has invested $1.7 billion in the resort.
A recent visit to the site shows the scale of his ambition. Rising on an area five times the size of Tokyo Disneyland are four hotel brands including a Four Seasons and a Marriott, a theme park with virtual-reality docks and life-sized, 3D-animated Korean characters, a cafe designed by K-pop star G-Dragon, villas, shopping malls and another 40 restaurants and food outlets. And South Korea’s biggest foreigners-only casino.
The resort has been opening in stages since April 2017. The casino debuted in February, joining Somerset serviced condos, convention center, theme park and shopping. The Four Seasons, a water park and movie-themed park are under way.
Such a mammoth Chinese-backed venture on an island with a turbulent record in the region’s politics has not gone unopposed by local pressure groups. Jeju recently completed a military-civilian naval base, delayed by local and international protesters who denounced environmental effects and raised concerns that it would be a base for US ships and missiles.
Landing gained conditional approval from the local government in February to expand its casino floor space sevenfold, but only after threatening to withdraw its promise of hiring thousands of Koreans. Local activists delayed the approval for months, arguing that Landing’s expansion would spearhead a Macau-like casino boom that would taint the island’s reputation.
“It was ridiculous that the government granted expansion approval to Landing based on the belief that Landing would help locals,” said Hong Young-cheol, at environmental group JSPSEP. Now, other casinos on the island will also want to expand, he added.
Jeju is one of more than a dozen Asian destinations trying to cash in on China’s appetite for gambling, following the boom in Macau that turned a Portuguese backwater into the world’s biggest gaming strip. Singapore, Malaysia, the Philippines, Australia and Cambodia have all added or expanded casino-resorts and Japan is about to join the fray.
Jeju Shinhwa’s main competitor on the South Korean island is expected to be Jeju Dream Tower, a 38-floor hotel with a casino and shopping that Chinese builders are erecting close to the airport. The projects could be game changers for the island compared to the casinos that existed before, Grant Govertsen, head of Asia equity research at Union Gaming, said in a phone interview from Macau.
“They all sucked,” Govertsen said. “We haven’t been able to see what a real integrated resort could do.”
The growth in Chinese tourism has piqued investor interest in casinos, which haven’t historically been a major source of revenue, according to Yang Gi-Cheol, head of the Jeju government’s tourism bureau. Half the island’s eight casinos are Chinese-owned and like every Korean casino except one in Gangwon province, all are off limits to Korean citizens.
“Macau distinguished itself with casinos,” Yang said at the island’s tourism bureau. “But Jeju’s values are its nature and culture.”
At Landing, Yang Zhihui says he isn’t trying to create another Macau either. He wants his project to be considered a “Jeju company” that supports residents and provides jobs, local partnerships and educations. His group’s donation to the local university earned him a bronze bust, now on display at campus.
Yang cultivated a network of wealthy investors, including Yao Jianhua, brother of wealthy insurer Yao Zhenhua. Yao Jianhua’s Hong Kong-listed investment company China Goldjoy recently upped its Landing stake to become a top shareholder, citing prospects of “China’s cultural tourism” market.
Still, the vast majority of visitors to the island are South Koreans—the air route from Seoul is the world’s busiest, with an average of 178 trips a day. For Koreans, Jeju is Instagram heaven with its volcanic coastline, Unesco heritage lava tubes and the nation’s highest peak, Halla Mountain, draped with waterfalls.
But Chinese tourists are the bigger spenders and the mainstay of the casinos. So, when visitor numbers from China slumped 76 percent last year, even businesses such as the Sex theme park and the Teddy Bear Museum, and the restaurants of Black Pork Street were hit.
At New Huacheng Travel, the island’s largest agency for inbound Chinese tourists, Finance Manager Park Ho-san sat alone on a recent March day, minding the empty office. Dozens of staff have left due to the Chinese freeze.
“The ban happened and everything has fallen through,” Park said.
Xi Jinping’s half-decade crackdown on extravagance within the Communist party has also affected the casino business in Asia, slowing Macau’s growth rate. Jeju, an hour’s flight from Shanghai, offers the advantage of being close enough but still offshore for Chinese high rollers, said Taewan Kim, professor of political science at Dong-eui University in Busan.
On April 9 Landing announced a plan to build another 9.5-hectare integrated resort in Parañaque City, near the Philippine capital.
“You don’t necessarily want the Chinese government to know how you’re spending your gambling money,” Kim said.
And Jeju has been especially welcoming, offering visa-free visits, permanent residency for condo investors, with medical benefits, and a 10-percent tax on gross gaming revenue, less than one-third the rate in Macau.
Landing is betting that those advantages, and Jeju’s location and natural attractions, will be a winning combination, especially for a Chinese audience keen on Korean culture and K-pop superstars such as G-Dragon, whose shoes and gold microphone are on display at the resort in a café the K-pop king helped design.
But the full potential of Jeju’s casino boom still hangs on the Chinese government’s control of the flow of tourists to the island.
In a lounge with a giant screen playing clips of G-Dragon, the resort’s chief executive, Jay Lee, a former Genting executive, is preparing for the possibility that China’s restrictions will eventually relax and the number of Chinese visitors will rebound.
“It’s all about the opening and closing of the tap,” he said.
Image credits: SeongJoon Cho/Bloomberg