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Macau Denies the Las Vegas Sands Application

Posted on December 5th, 2010

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Officials of the Macau government recently denied the Las Vegas Sands Corporation application for the land concession of two strips of land, namely Parcel 7 and Parcel 8 of the Cotai Strip. While in a regulatory filing, the Billionaire Sheldon Adelson, chairman and the Chief Executive Officer of the Las Vegas Sands Corp., said that while the government of Macau denied the company the land concession for the two parcels, they still aren’t giving up on Parcels 7 and 8. “SCL ( Sands China Ltd.) is considering all options available to it” he added.

From the letter it received from the officials of the Macau government last Thursday, Sands China Ltd, a Las Vegas Sands’ subordinate in China, has only a month to petition and reverse the decision of the courts in Macau. Moreover, they only have 15 days to ask the chief executive of Macau to review the decision. At this moment, the company officials said that they are still analyzing which option they prefer.

The Sands China Ltd has originally planned to build a number of hotels, gambling amenities, and commercial space for retail. They plan to build those in a parcel of 200 acres. Furthermore, the company officials had arranged with the first class hotel companies – namely, the Fairmont Hotels and Resort Inc, the Hilton Inc., and the Singaporean Raffles Hotels and Resorts for just such a project. Even though the company has no deadline with the plans, they assumed that the Macau government would approve the land concession for the two parcels and then start the construction of the amenities.

According to Sands, the companies can pay the premiums for every parcel in different terms, semiannual payments or in lump sum. Along with this, they are also required to pay the annual rent. Macau government offers companies an exclusive utilization of the parcels for 25 years as the initial period, and an automatic 10 year of extension. The company expected no hitches in their acquisition of the two parcels as there have been no reports of any problems for previous parcels of land they have acquired. Sands has reportedly used up more than $100 dollars for the acquisition of Parcels 7 and 8.

A Union Gaming Group analyst, Bill Lerner, said that the Macau’s finance chief admitted that Macau’s economy increases 3 percent to 5 percent annually and the land funding were not entrenched on the Macau’s gambling companies’ need. Bill Lerner added that, ”This suggests to us that this concession denial could be technical and a function of timing, and that ultimately Sands should be able to develop. On the other hand, perhaps SJM will be granted all or some of the sites for an opening beyond 2013.” Casino Tycoon and Mogul Stanley Ho’s company is also known as the SJM or Sociadade de Jogos de Macau Holdings. As the father of Macau’s casino businesses, Stanley Ho owns and operates all of the casinos in Macau and monopolized it for four decades until 2002.

Some of the parcels of land Sands China Ltd plans to develop happen to be the same sites Stanley Ho wants to use and develop. Some of the businessmen of Cotai assumed that there is a conspiracy between the Macau government and Stanley Ho. David Bain, an analyst, said that it could hurt the Macau government if it made an exception with SJM, especially if it is allowed to develop quicker than predicted. Analyst David Bain said “We believe it is negative for the investor perception with regard to the transparency and the objectivity of the Macau government.”

According to David Bain, there will be an increase in apprehensions felt regarding the plans of Wynn Resorts Ltd to develop and construct a casino in the Cotai strip. Steve Wynn, owner and operator of the Wynn Resorts Ltd, has not yet applied for any land concession in Macau. He, however, plans to build a complex for 1500 hotel rooms, 500 game tables and 1300 slot machines.