Opening of Legend Palace Hotel – David Chow -R
Chief Executive Fernando Chui Sai On – LWith HK$300 million in hand as a deposit for the sale of The Landmark Hotel, and a further HK$160 million on its way in about three weeks time, Macau Legend Development [MLD] is confident in the sale of its asset, with a company representative telling Business Daily that the buyer is “very serious about closing” and that they will “try and close it in the next several months”.
The sale, the second time the group has publicly sought a buyer for the property – including hotel, dining and conference facilities, casino and car parks – was announced on July 5, without the full sale price disclosed. A filing for the previous sale noted that the property was worth HK$5.47 billion as at end-2015.
Regarding strategy, after the sale the group plans to ‘consolidate resources in Macau, continue the successful redevelopment of Macau Fisherman’s Wharf and have capital ready to deploy outside of Macau without taking on too much leverage’.
This includes its project in Praia, the capital of Cape Verde, where the group is developing a HK$2.15 billion integrated resort and marina.
“We believe that through the internally generated cash from our business and the sale of the Landmark we’ll have more than ample proceeds to execute on what we’re building in Cape Verde,” noted the company representative. This will allow the group to connect better “into the West coast of Africa, where there’s a huge number of people,” as well as a further link to Portuguese-speaking countries and also China.
This would be done leveraging its links in Portugal via a Memorandum of Understanding and a joint venture signed in July of last year.
The JV puts 55 per cent of the Troia Casino – located on a promontory of Portugal’s Setubal region – in the company’s hands, as well as plans for a ‘riverfront area’ project, expected to include a marina but still under negotiation. Despite media reports that environmental protection issues could stymie the project, the MLD representative assured that “the port […] has nothing to do with that”.
“It’s some very technical things we need the government to be able to satisfy for us, and then we can move forward with the project,” said the company proxy. Since the “investment is quite modest in the first phase . . . [MLD] . . . can manage that through internal resources”.
Linking the group’s worldwide operations together is part of “how we get customers moving around,” said the rep, noting “we look at Portugal to Cape Verde as we look at Macau to Laos. There’s a lot of connectivity”.
About one month before the signing of the Setubal agreements, MLD entered into the Initial Project Development Agreement with the Laos Government, in order to purchase and operate the now-named Savan Resorts (formerly Savan Vegas Hotel and Entertainment Complex) property in the Savannakhet Province of Laos.
“A project mired in controversy,” given that the previous owner of the resort was, and continues to be, in litigation with the Laos Government regarding its seizure and sale, the MLD spokesperson said that “that controversy is what created the opportunity for us . . . It was a competitive bid [process], completely transparent, and we were able to do full due diligence, get a set of documents that we were very comfortable with, and obviously the Laos Government was happy to get someone of our quality – in terms of an operator, track record, connections into China – to come in and take over that asset”.
In fact, MLD delayed the purchase of the property numerous times as it conducted due diligence on it.
“We look at countries like Laos that are really going to benefit from more Chinese investment, more emergence of their own middle class and really much better connectivity – not only to China, but in the whole region,” said the MLD rep, noting that with regard to the project “the first thing is to get the Laos property renovated and expanded and then we’ll have to bring people in”.
“The nice thing about Laos is you’re not really just relying on the Chinese market,” he continued, noting that projects such as those on Jeju Island in South Korea encountered issues due to this.
“When you’re building up these projects, you want to have a diversified customer base,” said the MLD rep, pointing out that the growing middle class in the region will soon be able to travel more easily due to infrastructure development projects through ‘One Belt, One Road’.
This Chinese national project has prompted “a lot of countries [to] approach us […] saying ‘would you be interested in investing, developing a new integrated resort?’” as part of One Belt, One Road, said the company rep, noting that “obviously we’ll be very cautious in where we do that, but I think that overall policy [is] certainly helping us out”.
MLD “like[s] protected markets in those kind of areas and you can make sure your investment is going to get a proper return . . . a 99-year monopoly on the three provinces” with the improved infrastructure creating “a real resurgence in the middle classes of those countries [and] higher disposable incomes”.
The group’s presence in Beijing, through its first Legendale Hotel (the second of its name is set to be built on Macau Fisherman’s Wharf and is currently under discussion with the Macau Government), as well as its Macau properties allow it access to both the Greater Bay Area and ‘One Belt, One Road’ initiatives, as well as the central government-led plan for the MSAR to act as a platform for Portuguese-speaking countries.
But it hasn’t only focused outwards, opening its Legend Palace property in late February of this year on the Peninsula, next to the ferry terminal. For its Legendale property in Macau the company is “still in negotiations with the government on the height of the fourth hotel [and] at the right time adding that hotel will be very important to finishing off Fisherman’s Wharf “.
The project for the hotel was initially set to be 90 metres in height but concerns about it blocking the sightlines of the cultural heritage classified Guia Lighthouse caused the Cultural Affairs Bureau to suggest a 60-metre height limit.
“I think what we’re building in Macau is very diversified,” said the company rep, noting that “as more middle-class type tourists come to Macau, the chance of them coming down to Fisherman’s Wharf and enjoying the amenities we provide there […] it’s probably a more natural fit than a high-end VIP gamer.”
And while “there’s been a resurgence of VIP recently […] the reality is Macau is in the future going to be more and more mass gaming and mass tourism,” he opined.
“One of the things we’re going to have to do is make sure that we’ve got attractions – and not just MICE (meetings, incentives, conferences and exhibitions) business – but attractions that get people down there during the week,” he said, noting Macau Fisherman’s Wharf “is a lot of non-gaming, anyway; it was the first attempt at non-gaming in a serious way”.
Next steps are to “get the marina in” but not focus on any type of amusement park, given that “if someone wants to build an amusement park in Macau they’re going to have to build something of the quality of a Universal Studios or a Disneyland” due to nearby competition from Mainland theme park offerings.
Despite the opening of the new Pac On Ferry Terminal in Taipa, MLD professes no concern that the current ferries operating out of the Outer Harbour Ferry Terminal will stop any time soon.
“I think there was a rumour many years ago of the desire to shut down the Macau Ferry Terminal, I think that would be met with a huge backlash from the Peninsula people who would want to use that ferry terminal,” said the representative, adding, “When the sky bridge finally connects us to the Ferry Terminal and the Jai Alai and Oceanus [SJM’s nearby properties]” as well as the “ferry terminal […] getting a facelift” customers will have access to a “hub around the five or six casinos and hotels” in the area, straight off the ferry.
In addition, the Hong Kong-Zhuhai-Macau Bridge “that’s sitting right off of our property . . . [provides[ . . . increased connectivity to Zhuhai,” while the development of the new reclaimed land areas adding more residential nearby will continue to boost the group’s appeal on the Peninsula to both a locals market as well as visitors coming through the Gongbei border crossing.
Happy as we are
“I think there’s a good role for us as that mid-tier,” said the representative of the group’s overall operations. “David Chow [Kam Fai, MLD’s Co-chairman, Executive Director and CEO] is not going to build multi-billon dollar assets. We’re not competing with the big international operators. And in fact our space at the mid-level, there’s not a lot of guys like us – that build US$200-400 million assets. And I think we’re pretty good at that, we don’t take a lot of risks,” he said.
And while many other operators in the MSAR such as Melco Resorts & Entertainment are focused primarily on the opening up of the gaming market in Japan, MLD is content to wait and see if its shareholders have any interest.
“One of our largest shareholders is Dynam, which is the second largest pachinko company in Japan. So I think to the extent that Dynam is successful in doing something in Japan and they invite us in, of course we’d have a look.”