Which of Macau’s gaming concessionaires is going to run or at least licence the casino likely to be located inside the six-star hotel planned for One Oasis, a mixed use, primarily residential development planned for Cotai?
Asian Gaming Intelligence understands MPEL, the Chinese-Australian joint venture between Melco International and Crown Ltd that owns and operates the Altira Macau and City of Dreams casinos in Macau, has already submitted a request to the Macau government for a casino service agreement with the consortium developing One Oasis.
Under the service agreement, MPEL would allow its gaming licence (itself a sub concession purchased from Steve Wynn in March 2006 for USD900 million) to be used to operate a casino at the six-star hotel.
AGI further understands the arrangement would work in a similar way to the 40:55:5 revenue share model operating between Stanley Ho’s casino operating company, SJM, and some of the so-called satellite casinos functioning under SJM’s gaming licence. In other words, the government gets 40 percent of the revenue in tax, the property owner gets 55 percent and the licence supplier (i.e. MPEL) gets five percent.
This might not sound like the best deal for MPEL, given the potential leveraging power of a scarce Macau gaming licence (there are only six concessions and sub concessions currently in the market). But were MPEL to price the licence any higher, it might risk driving the One Oasis consortium into the arms of one of the other licence holders.
Such a 40:55:5 arrangement would also be strings free for MPEL in the sense the company would not have to hire, train and supply expensive locals to staff the casino portion of the property. Macau casino dealers cost more to hire on average than Singapore dealers.
Given that MPEL is listed on New York’s Nasdaq, it would need to satisfy US regulators and investors that the new Cotai casino to which it appended its licence (if not its management team) was being run in accordance with US regulatory standards in terms of issues such as anti money laundering rules and suppression of organised crime.
A more obvious gaming fit for One Oasis might have been Stanley Ho’s casino operating company SJM. That’s because one of the One Oasis consortium partners, Success Universe Group, already has a close business relationship with SJM.
Hong Kong-listed Success Universe Group is a 49 percent joint venture partner in Ponte 16, an SJM-licensed gaming resort that opened in February 2008 at the historic Inner Harbour on Macau peninsula. SJM itself owns 51 percent of Ponte 16.
But one of Success Universe Group’s minority shareholders isn’t on very good terms with SJM because of the sluggish performance of Ponte 16. That company is Maruhan Corp, a Japanese pachinko parlour operator, and an 18 percent shareholder in Success Universe Group and by extension a 4.9 percent shareholder in Ponte 16.
Maruhan is somewhat less than thrilled about the performance of Ponte 16 since its opening in February 2008. Ponte 16 had a very modest capex by modern Macau standards—HKD2.4 billion (USD310 million at current exchange rates)—but has also been a sluggish earner by Macau standards, continuing to post significant operating losses nearly two and a half years later. As of 25th June this year, Success Universe Group had outstanding shareholder loans to Ponte 16 of HKD825.9 million (USD106.3 million), according to a filing made to Hong Kong Exchanges and Clearing Limited.
Success Universe Group’s annual report shows that as at 31st December last year, a shareholder’s loan of HKD132.2 million (USD17 million) linked to the Ponte 16 project was outstanding directly to Maruhan.
Maruhan privately blames SJM for the way Ponte 16 was marketed as a predominantly mass segment operation catering for visitors from neighbouring Zhuhai on the Chinese mainland, in a Macau market still dominated by VIP play. SJM in turn is unimpressed by Maruhan’s inability to deliver Japanese gamblers to the property, which was part of the logic of bringing in Maruhan as a minority partner of the then Macau Success Ltd in the first place.
Other members of the One Oasis partnership include two Hong Kong-based developers—ITC Properties Group, a Hong Kong-listed company that worked on construction of Melco Crown Entertainment’s VIP-focused casino, Crown Macau (now Altira), and Nan Fung Group, a privately held company with development projects throughout Greater China.
Completing the One Oasis consortium line up is Linkeast Investments, a Macau-based company, and ARCH Capital Management, a real estate private equity fund focusing on Greater China, India, Thailand and Vietnam. ARCH is a joint venture with the Ayala Group, the oldest and reportedly largest (by net income) conglomerate in the Philippines.
The development’s website describes the handover date for the 870 residential units housed in five towers as the second quarter of 2013. That may be a little ambitious, given the current row over the Macau government’s ‘one for one’ policy (i.e. one local construction worker to be employed for every non-resident construction worker). Sands China is also in theory ahead of One Oasis in the queue for construction worker quota for its Cotai 5 and 6 project, which is unlikely to be completed until well into 2012. One Oasis gives no date for the construction of the hotel.
