Merlin Entertainments has announces it will open its first Legoland park in Japan, the second biggest theme park market in the world.

The new park, to be located in the city of Nagoya, will cost ¥32 billion in total and adds to Merlin’s existing portfolio of six Legoland parks in five countries.

The park will be opened under Merlin’s ‘operated and leased’ model, with the infrastructure of the park being funded by a third party.

Merlin will directly invest ¥9.2 billion in the park over the next three years and lease the balance of the assets from a company owned by Kirkbi Invest, a privately held investment and holding company with a 75 per cent ownership share in the Lego Group and a 29.9 per cent shareholding in Merlin.

Kirkbi investment, which is separate to that of Merlin’s, will be funded through a combination of equity and external debt provided by Sumitomo Mitsui Banking Corporation.

Merlin’s investment is expected to deliver returns consistent with the group’s stated pre-tax cash ROIC target of 20 per cent.

Nick Varney, Merlin Entertainments chief executive, commented: “Today’s announcement is another major milestone in the development of the Legoland brand.

“We are delighted to be working closely with the city of Nagoya and with Kirkbi on the project, both of whom appreciate the potential of the brand in the second biggest theme park market in the world.

“The park will make a significant contribution to the growth of the Merlin group from opening in the second quarter of 2017, as well as supporting our continued geographic diversification.

“Long term, we continue to believe that there is significant opportunity for the Legoland brand, with the potential for up to 20 parks across the world and we remain committed to our target of opening a new park every two to three years.”

The Japanese theme park market is the largest in Asia, with an estimated value of £4 billion, and already boasts some of the world’s most successful theme parks

Given the high level of Lego brand awareness and the specific ‘young family’ target demographic, Legoland Japan is expected to be complementary to the existing parks in the region.

Nagoya is ideally located in the centre of Japan and is approximately two hours from Tokyo and one hour from Osaka, with independent market research suggesting a potential catchment area in excess of 20 million people.

The park will be located on a site close to the port, with excellent road and rail links.

The initial development will focus on the theme park, with potential options available for further park expansion and the development of on-site, themed accommodation over future periods.

Legoland Japan will be of similar scale to the recently opened Legoland parks in Malaysia and Florida and is expected to employ up to 1,000 staff in a variety of roles.