Shun Tak plans $4.5b hotel complex
Waterfront project features a casino, luxury apartments, offices and a retail development
Shun Tak Holdings plans to spend $4.5 billion to develop Macau's first large-scale residential, hotel, office and retail complex on its recently acquired waterfront site.
Shun Tak deputy managing director Daisy Ho Chiu-fung told the South China Morning Post that the investment included the $1.5 billion acquisition cost of the site, next to the Macau Tower in Nam Van district, from chairman Stanley Ho Hung-sun last month.
The project will comprise 800 luxury apartments, a four to five-star 500-room hotel with a casino, a grade-A office complex and a shopping centre.
'It will be the first such large-scale comprehensive development in Macau,' Ms Ho said.
In a bid to capitalise on a projected tourism boom, the hotel will be the first to get off the ground and is slated for completion by 2007. The whole development will be finished by 2009.
'The hotel will target business travellers, as it is located next to the Macau Tower Convention and Entertainment Centre,' Ms Ho said.
About 70 per cent of exhibitions in Macau were hosted at the exhibition facility, which had also become a prime venue for public events, she said.
Two weeks ago, Shun Tak agreed to lease 20,000 square metres in the hotel project to Sociedade de Jogos de Macau (SJM), which will operate a casino with 180 tables.
SJM, majority owned by Sociedade de Turismo e Diversoes de Macau, is one of the three companies granted a concession by the Macau government to operate casinos in Macau.
'Having a casino will help shorten the hotel's pay-back period,' Ms Ho said.
CLSA analyst Keith Yeung estimated the full-year contribution from the 20,000 sqm lease to SJM would be as high as $840 million, based on net income of $14 million per table per year.
According to the leasing agreement, Shun Tak would charge SJM 40 per cent of the net earnings for each of the first 60 gambling tables, and 30 per cent for the remaining 120 tables.
Mr Yeung estimated Shun Tak's resultant cash flow at $5.55 billion, or $2.40 per share, lifting the net asset value to about $11.30 per share.
Meanwhile, Shun Tak submitted a plan to build an 815,600 sq ft residential addition to its 34.9 per cent owned Westin Resort.
If approved by the Macau government, the company will build 15 houses, six mansions, 15 villas and a residential block.
As of June 30, Shun Tak had a net cash surplus of $1.9 billion and $4 billion in untapped credit. Its Macau land holdings are about eight million sqft.
'Macau will have a major facelift three years from now as major developments are slated for completion by then. You will notice a new building topping out in every three months in Macau,' Ms Ho said.
She expressed confidence in prospects for the Macau property market despite concerns of a property bubble.
Home prices in Macau have increased 30 per cent this year after an eight-year market slump and many buildings purchased by speculators are lying vacant.
Transaction volumes and prices started rocketing at the start of this year after the government liberalised the gaming industry.
Ms Ho believed residential prices would grow at least 20 per cent over the next 12 months.
Mass residential prices now range between $800 and $1,100 per square foot. Luxury residential prices could reach $2,000 per square foot or more, Ms Ho said.
'Although Macau is tiny compared with Hong Kong, the increasing number of professionals and workers arriving from Hong Kong, the mainland and western countries will create housing demand,' she said.
