Wynn's Cotai deal could boost rivals, too

PUBLISHED : Tuesday, 13 September, 2011, 12:00am
UPDATED : Tuesday, 13 September, 2011, 12:00am


Macau casino developers including SJM Holdings and MGM China may finally secure rights to build on the Cotai strip after rival Wynn Macau said yesterday it had received a long-awaited Cotai land grant for a new casino resort project.

Wynn said yesterday it would have to pay a 1.55 billion pataca land premium after the Macau government approved a 25-year lease for a 20.6 hectare parcel of land on Cotai, where it plans to build its third Macau hotel. The company applied to develop the site as early as 2005 but revised its plans several times since, and the government has slowed approvals for new casino projects.

Within 15 days of the land grant being published in Macau's Government Gazette, Wynn Macau will also pay US$50 million to a Macau company, Tien Chiao Entertainment and Investment, in exchange for it relinquishing rights to the Cotai site, under an agreement disclosed in Wynn Macau's 2009 listing prospectus.

Wynn Macau chairman Steve Wynn said recently he planned to spend about US$2.5 billion building a casino resort with around 500 gaming tables and 1,500 hotel rooms that he promised would be 'a humdinger.'

Analysts said movement on Wynn's land application could bode well for competitors seeking to break into Cotai, currently home to large-scale resorts that were developed by Sands China, Melco Crown Entertainment and Galaxy Entertainment.

'This news could be perceived as positive for other operators, for example SJM and MGM, that are seeking government approvals for Cotai projects,' CLSA Asia Pacific consumer and gaming analyst Aaron Fischer wrote in a research note.

Approvals for new casino developments have come under increasing government scrutiny in the wake of the corruption scandal that brought down Macau's former land and public works secretary, concerns over the rapid growth of the gaming industry and bottlenecks in the increasingly tight local labour market caused by mega-resort projects.

While developers and banks previously started projects with only informal approvals of development rights, companies now tend to wait for official land grants. The last casino project to receive formal approval by way of an announcement in the official government gazette was Sands China's US$4-plus-billion Sheraton-Intercontinental-Holiday Inn development, under construction since at least 2007 but approved only in May last year.

In December last year, the Macau government rejected Sands' application to develop another multibillion-dollar casino complex on a neighbouring 110,000 square metre Cotai site, where the company had already spent US$102.4 million on pre-construction work.

Analysts expect Wynn Macau's land grant means the company will open in Cotai in 2015 at the earliest, with SJM and MGM to follow, pending government approvals.

In addition, Melco Crown in June struck a US$360 million deal to acquire majority control of the aborted Studio City project, which included rights to a largely vacant 150,000 square metre site on Cotai.