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SCMP Reporter

Firm opts to deal directly with Macau government to secure land grant after agreement with Venetian Group turns sour

Regal Hotels International Holdings said yesterday it had pulled out of its high-profile joint venture with a leading United States casino operator in Macau's Cotai Strip and that it planned to go ahead with the project on its own.

Relations had turned sour over Regal's memorandum of agreement to lease a 130,000 sq ft casino and a 1,500-seat theatre to the Venetian Group.

The agreement, signed in March, 'ceased to have effect' as of Tuesday and had no  binding force,  Regal  said.

The company's shares yesterday fell 9.09 per cent to close at 70 cents, off a low of 68 cents.

Regal was one of the seven hotel operators that had signed an agreement with the Las Vegas-based Venetian Group to open hotel-casino projects on Cotai Strip.

Other hotels that committed were Dorsett of Far East Consortium, Four Seasons, Hilton, InterContinental, Marriott International and Starwood.

'By reason of certain material changes in the circumstances affecting some fundamental issues that had remained unresolved, the terms of the definitive agreements could not be agreed or finalised,' Regal said.

Regal director Donald Fan Tung said the deal 'was not as fair as we thought', but he declined to comment further as the agreement was bound by a confidentiality clause.

He said the company would press ahead with plans to develop the $3 billion, 3,950-room hotel project and the casino would be leased to an authorised gaming operator in Macau by tender.

'If Venetian made an attractive offer to us, we would still lease the casino to them,' said Mr Fan without giving a timetable for finding a new tenant.

'The company has invested a significant amount of resources in this project and will continue to develop it.

'We have applied directly to the Macau government for the land grant of the site previously selected for the project and have been told a decision will be made swiftly.

'We thought we could only get the site through Venetian, but we later found that we can deal directly with the Macau government, so why don't we do it on our own?'

Mr Fan said the 3.4 million sq ft project, consisting of three four-star to five-star hotels, would run in two phases. The first would start early next year and complete by the end of 2008, and the second ready by the end of 2009.

He expected the investment in each phase  to take about five years to recoup.

Mr Fan said the project remained the same as before, apart from the addition of a 3-D Imax cinema and a hotel training school.

BNP Paribas Peregrine head of regional property research Adrian Ngan Wai-hung said the sharp decline in Regal's share price had been prompted by investors' fears over whether the resort project would be terminated.

'But it seems that the project is still proceeding and it should be quite easy to find a new tenant for the casino, given Regal Hotels' brand name and its appeal to many mainland tourists,' Mr Ngan said.

However, he added there was a potential risk for Regal  in being given the cold shoulder by Venetian in the promotion and joint development of Cotai Strip.



Regal drops US partner to go it alone on Cotai Strip project