Stalled Casino Projects in Macau Reviving
The global financial downturn has not passed over Macau, the world’s biggest gaming market. But work on four hotels of the 70% complete Las Vegas Sands development, stalled in November, is on course to begin again by the end of the year if the developer obtains financing to complete the $12-billion project, which includes an 1,800-room Sheraton and three casinos on reclaimed land known as the Cotai Strip. Rival Melco PBL Entertainment has raised $200 million in the U.S. to repay debts and accelerate repayments due on a $1.75-billion construction loan for the partially built $2.1-billion urban entertainment resort development, also on the Cotai Strip, called City of Dreams.
Macau’s casino-led construction boom was brought about by the government’s decision, in 2002, to allow foreign casino operators into the market. But in the first half of the year, gaming revenue dropped 12% compared to last year, to $6.4 billion. That was the worst period since the government liberalized the sector.
Sources say the gaming business is bouncing back. Melco says revenue picked up sharply in July, when the casino attracted approximately 1.1 million visitors. Rolling-chip volume came in at $2.65 billion in July, compared to $1.94 billion in June. “The macro environment in Macau is, in our assessment, also likely to materially improve during the coming months,” says Lawrence Ho, co-chairman and CEO of Melco Crown Entertainment.
The Las Vegas Sands will resume construction before the end of the year, says Sheldon Adelson, LVS chairman. He says the first phase of company’s $5.5-billion Marina Bay Sands casino and convention complex in Singapore now is due to open in February, instead of by year-end.
The price of Macau’s City of Dreams has risen due to design changes and higher-than-anticipated construction costs, say sources. For example, an apartment-hotel complex has grown from 650 units to 800. An agreement with the Macau government about the cost of the land took longer than expected and plans to expand the gross floor area were approved after protracted discussions with the government.
The 500,000-sq-m first phase of the project consists of four towers of 28 to 35 stories, a 42,0000-sq-m casino, a retail arcade and a performance hall with seating for some 2,000 people opened in June, a few months late. The work, managed by Leighton Holdings Asia, in joint venture with China State Construction Engineering, was fast-tracked. A second phase will add a theater that extends 23 m below grade and 21 m below the water table. The second phase includes construction of the Grand Hyatt Macau, set for an October start.