(WSJ) Universal Parks & Resorts and its Chinese partners are expanding plans for a 300-acre theme park in Beijing, doubling their investment to $6.5 billion on heightened optimism about the booming Chinese theme-park market, according to a person familiar with the matter.
The investment would surpass that of Walt Disney Co.'s Shanghai Disney Resort, which at the time of its 2016 launch cost more than $5.5 billion, and would be the most ever spent on a theme park at the time of opening, according to industry experts.
"It would be the first time Disney has been outspent on a theme-park project," said Dennis Speigel, who heads a theme-park consulting firm in the U.S.
The decision to double down on Universal Beijing came after Universal and its Chinese partners saw the success of Disney's Shanghai park, which drew more than 11 million visitors in its first year after opening in 2016, the person said. Disney has since expanded the Shanghai park, opening a land based on the Toy Story movies last month.
Universal now expects the Beijing park to draw 10 million visitors in its first year, up from an initial projection of 7 million, the person said.
The increased investment will go toward expanding retail and entertainment space, improving planned attractions and building new lands including one based on the Harry Potter books and films, the person said. The park will also have attractions based on the Transformers, Minions and Kung Fu Panda film franchises, which have strong followings in China, a second person said.
The move comes as China's theme-park industry is on track to surpass that of the U.S.'s in the next few years to become the world's No. 1 market. Theme-park revenue in China topped $6 billion last year, up 27% from 2016, and is expected to hit $14 billion by 2022, according to market researcher Mintel.
For the Beijing park, Universal is partnering with Beijing Shouhuan Cultural Tourism Investment Co., owned by five Chinese companies.
Universal Parks & Resorts is a unit of Comcast Corp.'s NBCUniversal, and has theme parks in Los Angeles, Orlando, Singapore and Japan. It has a 30% stake in the Beijing park, with its Chinese partners owning the remainder.
In announcing plans in 2014 to build the Beijing park, Universal said it would cost $3.26 billion and open in 2020. The opening will now be pushed back to 2021 because of lengthy negotiations over commercial terms and hiring challenges, according to people familiar with the matter.
Universal has continued to expand ambitions for the Beijing park since its announcement and hiring is on schedule, one person said, adding that new plans include a CityWalk shopping, dining and entertainment district adjacent to the park as well as a Universal-branded hotel.
Although design work has begun and land has been cleared, major construction hasn't yet started but is expected to begin this year, people familiar with the matter said. At the time of the 2014 announcement, only a preliminary agreement was in place between the partners, the first person said.
The joint venture was established in 2017, after more than three years of talks, that person said, adding to delays.
The park's launch has been further hindered by struggles to hire and retain talent, according to comments made by Universal executives at an industry panel in Beijing last month, according to a person who attended.
The executives said employee turnover in Beijing was about 35%, the person said. Critical roles such as art direction, engineering, design, procurement and architecture have been a challenge to fill, people familiar with the matter said.
Several senior theme-park executives in China who were approached by recruiters for Universal said they balked at demands that they first spend six months at Universal park's headquarters in Orlando.
To pay for the park, the partners last month took out an almost $4 billion syndicated loan to cover about 60% of the costs, said the first person, adding it was believed to be the world's largest syndicated loan for theme-park construction.
Nine Chinese banks participated in the loan, led by Agricultural Bank of China Ltd. Other participating banks include Industrial & Commercial Bank of China Ltd. , Bank of China Ltd., China Construction Bank Corp. , China Merchants Bank Co. , Hua Xia Bank Co. , Bank of Beijing Co. , Beijing Rural Commercial Bank Co. and Bank of Communications Co., the person said. Because the duration of the loan is 25 years, no foreign banks participated, the person said.
King & Wood Mallesons were legal advisers to the lenders, while Zhong Lun Law Firm and Davis Polk & Wardwell were legal advisers to the borrowers. BNP Paribas was the financial adviser to the borrowers.
Source: Wall Street Journal By Wayne Ma
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