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December 7, 2005

Wynn Details Macau Concession Plans

Posted by Hunter

In a move that will surely please investors, Wynn has discussed plans to possibly offer sub-concessions or joint ventures in Macau:

http://www.lasvegassun.com/sunbin/stories/sun/2005/dec/07/519780837.html

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Comments

Read archived comments (9 so far)
December 7, 2005 9:41 AM Posted by detroit1051

I believe this is a workable plan, but is Wynn's change from his previous position because of potential difficulty in getting financing? I'm glad Wynn will develop on the Cotai Strip. Even with MGM as a neighbor downtown, Cotai seems to me to be the preferred area, sort of like Fremont Street vs The Strip in Vegas.
I'd like to hear Chris in Hong Kong's opinion of Steve's announcement and also his thoughts on the two casino areas in Macau.

December 7, 2005 9:55 AM Posted by socalduck

I loved Wynn's jab at the end of the article about Adelson's "box of baccarat."

As a Wynn investor, I see this as a tacit admission that they don't have the resources to go it alone on all of these projects. For this reason, a partnership with a strong player like Caesars makes a lot of sense.

December 7, 2005 7:19 PM Posted by chris

It probably makes sense for Steve to do a deal (or deals) sooner rather than later.

The first reason is that Wynn's concession only lasts until 26 June 2022, so joint venture deals are a means by which Steve can maximise the money he makes under his concession (for the terms of the concession, see http://www.dicj.gov.mo/EN/Contratos/Wynn/2002BORAEM27S2Sup.htm). Wynn Resorts is obviously highly leveraged already and Wynn Las Vegas has only been in operation for 7 and a half months, so it just wouldn't be possible to go out and finance multiple additional resorts in the near future.

Secondly, if you look at article 106 of Wynn's concession (an article which is replicated in the SJM and Galaxy concessions), you will see that the Macau government has undertaken not to grant further concessions prior to 1 April 2009. In other words, you can bet that all the big global gaming operators without a piece of action in Macau will be lobbying the Macau government hard to secure one of the new concessions when 2009 comes around. So if Wynn and LVS don't do deals with the other operators now then the incentive for the other operators to seek new concessions in 2009 will only increase. (If Wynn and LVS wanted to be really smart, when signing deals with any joint venture partners they may want to seek undertakings from the partners that they will not seek to compete with the joint venture or Wynn/LVS by pursuing Macau developments other than through the joint venture.) So there is a window of opportunity between now and the time at which lobbying for new concessions begins where Wynn and LVS have a clear advantange. The clock, however, is ticking and each day that we get closer to 1 April 2009 it is obviously going to make more sense for a Harrah's or Station Casinos (not to forget the other operators around the world like Sun City from South Africa - who have also been poking their noses around Macau) to try their luck in getting a new concession rather than paying Steve a lot of money.

As for the Macau peninsula / strip thing - there's no doubt that the Macau peninsula will be the main hotel / gaming area for the next few years - at least until a bit of critical mass starts to develop on Cotai. Cotai is a barren piece of dirt - there is simply ZERO tourist flow in the area and even after Venetian opens there will be nothing but the Venetian to draw people to Cotai. It is also going to take at least a few years for the Macau government to develop better transport links from the Macau peninsula to Cotai (ie, the proposed light rail system). On the other hand, the Macau peninsula has all of the key tourist sites, better transport, and the critical mass of gaming / hotels (albeit at the low-quality end of the spectrum at the moment) already exists.

On the other hand, the long-term advantage that Cotai possesses is that it is a massive clean slate that gives developers enough room to conceive whatever dreams they can come up with. Keep in mind that Macau's total land area (including Taipa / Cotai and Coloane) is less than 12 square miles, and there are simply no significant vacant sites available on the Macau peninsula. So other than small/niche developments (and redevelopments of old sites) all of the new development needs to be at Cotai.

The other factor is that Macau peninsula is "old" Macau and most of the sites are tightly held by Macau interests, whereas Cotai is new landfill and the Macau government has a relatively free hand in selling plots to developers. Cotai will also not suffer from the unsightliness of the disgusting old buildings that are abundant on the Macau peninsula.

Anyway, I will be in Macau all day this Saturday and will take the camera with me. In addition to new Wynn and Venetian pics, will also take some pictures of some of the older buildings on Macau peninsula to show you what I mean by "disgusting".

December 7, 2005 8:00 PM Posted by chris

One additional point - my reading of the article suggests that what Steve is considering is not a "sub-concession". A sub-concession is what LVS has from Galaxy and the MGM / Pansy Ho joint venture has from SJM. This differs from, say, (i) Crown Macau / City of Dreams where Melco has entered into a contractual arrangement with SJM whereby SJM will technically operate the casinos within the properties but gaming revenues will be shared between SJM and Melco and (ii) the Shangri-La and Four Seasons developments where LVS will help front the cost of constructing the casinos within the properties and then be responsible for operating the casinos. The key difference is obviously the economics - a sub-concession would involve a one-off payment to a concession holder after which the holder of the sub-concession could develop properties itself (and enjoy all of the revenues from those properties), whereas Wynn could conveivably structure an agreement with a Harrah's or Station Casinos in any number of ways.

The Macau government has indicated that it will only allow one sub-concession for each concession holder.

December 31, 2005 5:52 AM Posted by rjs

Chris, can you email or post a link to your pics? I'd especially like to see the progress made so far on the Cotai Strip. I have a few cotai related domain names and hope they amount to something in the coming years. Thanks.

December 31, 2005 10:51 AM Posted by Hunter

The photos have been printed in several other stories we have on Macau.

http://photos.ratevegas.com/photo/gallery/macau

January 3, 2006 4:02 AM Posted by chris

I will be back in Macau on 14/15 January. Fisherman's Wharf opened up on New Year's Eve with much fanfare and fireworks (and - I am not sure why - the band "Chicago" belting out their old hits) and had around 100,000 people through in the first 24 hours - an article in the Macau press the next day quoted someone from the Macau Sands saying that business was up 40-50% because of the increased traffic flow in the area. The other development is that Emperor Hotel / Casino is finally finished and will open up on Thursday January 5. So I should be able to check out both of these venues as well as progress at Wynn / MGM / Galaxy and the cotai area.

January 5, 2006 7:43 PM Posted by stug

Thanks Chris!

Refer to your words "Secondly, if you look at article 106 of Wynn's concession (an article which is replicated in the SJM and Galaxy concessions), you will see that the Macau government has undertaken not to grant further concessions prior to 1 April 2009.",

There u made a mistake, it is ARTICLE 104, not ARTICLE 106 as you mentioned before.

pls check at http://www.dicj.gov.mo/EN/Contratos/Wynn/2002BORAEM27S2Sup.htm

January 12, 2006 5:39 AM Posted by stug

Latest news 2006-1-11:

The Secretary for Transport and Public Works of Macau, Mr Ao Man Long attends the press conference on ´┐ŻPreliminary Study of New Urban Districts Planning´┐Ż.

New land for Macau, I think maybe it's a chance for LVS,WYNN,MGM,SJM and Galaxy all of these casino operators.

u may check it at:
http://www.gov.mo/egi/Portal/rkw/public/view/showcomp.jsp?id=InfoShowTemp&docid=c373e907bc7994b18f6abc5244504a95