Lukewarm interest for Sands shopping malls

PUBLISHED : Tuesday, 14 April, 2009, 12:00am
UPDATED : Tuesday, 14 April, 2009, 12:00am

Interest among prospective buyers of two mega shopping centres attached to Las Vegas Sands Corp's Macau casinos appears lukewarm, given the company's aggressive pricing and challenging market conditions, sources said.

Several funds and large real estate investors have been approached by Goldman Sachs, which is managing the sale of the themed Cotai retail arcades attached to the Venetian and Four Seasons casino resorts.

Sources said Sands was asking would-be buyers to shoulder lower returns and bet big on bullish projections despite the down market and uncertainties in Macau.

The firm's targeted proceeds from the auction-style sale remain unclear, but the sources indicated rental income and yield percentages that would suggest an asking price of about US$1 billion. The company declined to comment.

Bids were due in to Goldman this week, the sources said.

Sands chairman and majority owner Sheldon Adelson announced last month that about 19 parties were potentially interested in the shopping centres. At 1.21 million square feet, they are about 1.5 times the size of the shopping area at IFC One and Two in Hong Kong.

'Maybe there will be someone who sees long-term potential, but there's no financing market now, so my guess is they don't get close to their number,' said one source who passed up the deal. 'They need the money badly but the auction will be a real crap shoot.'

Sands has in recent months sought to cut costs and raise new funds from asset sales to avoid further risk of defaulting on portions of its US$10.5 billion in long-term debt.

In November last year, the company raised US$2.14 billion in a share sale to avoid tripping loan covenants on its Las Vegas financing, which could have resulted in banks calling in loans.

Selling the Cotai shopping centres has always been a part of the company's overall Macau strategy, but the timing of the auction process appears less than ideal.

Macau's tourism and retail outlook has been clouded by regional recessions and Beijing's 10-month-old restrictions on mainlanders travelling to the city. At the same time, many potential bidders are themselves strapped to raising funds for large-scale acquisitions.

The assets on the block include the 1.01 million square foot Grand Canal Shoppes on the upper floors of the Venetian, which opened in August 2007.

Also to be included in the sale is the 211,000 sqft luxury shopping centre attached to the Four Seasons, which opened in August last year.