Las Vegas Sands Corp (LVS) said today in a 10-K filing to the US Securities and Exchange Commission it is in talks with leading hotel groups Starwood and Shangri-La to amend the terms under which they will manage four hotels on Cotai Plots 5 and 6.
LVS said in the annual report to stockholders that the talks relate to extending the construction deadlines for the hotels, which are being built by LVS, but operated by the hotel groups. A total of 6,400 rooms are due to be built on Cotai 5 and 6, shared between Starwood’s Sheraton and St Regis brands, and Shangri-La’s Traders and Shangri-La brands.
LVS added that if the talks with Starwood and Shangri-La are not successful, it’s possible, in a worst-case scenario, the hotel groups could seek to withdraw from the project.
“Our management agreements with Starwood and Shangri-La impose certain construction deadlines and opening obligations on us and certain past and/or anticipated delays, as described above, would allow Starwood and Shangri-La to terminate their respective agreements,” stated the company.
“We are currently negotiating (or undertaking to negotiate) amendments to the management agreements with Starwood and Shangri-La to provide for new opening timelines,” it added.
The opening of Cotai 5 and 6 has been put back several times due to construction labour shortages in Macau. In June 2010 LVS said in an SEC filing it expected that first phase to be ready by the third quarter of this year. In the company’s third quarter earnings conference call in October last year Michael Leven, acting CEO of Sands China, said initially he expected clarity on Cotai 5 and 6’s opening “in 30 days” then amended that by the end of the call to “by the end of this year”. In November last year the company issued a further statement saying the project’s completion date was not “currently determinable with certainty”, citing the labour shortage. Days later the Macau government told LVS in a letter it had “not approved” the company’s plan for construction on the neighbouring Cotai Plots 7 and 8 but added subsequently in remarks made by officials that the company had the right to appeal the decision. That non-approval was however confirmed two weeks later.
Today’s SEC filing reiterated the difficulty in setting a new deadline for Cotai 5 and 6.
“We are currently working with the Macau government to obtain sufficient construction labor for the project,” stated the company.
“Until adequate labor quotas are received, the timing of the completion of phases I and II is currently not determinable; however, we are progressing on alternative scenarios for completion of selected portions of phases I and II with the construction labor currently onsite. We intend to commence construction of phase III of the project as demand and market conditions warrant it.”
Sheldon Adelson, Chairman and Chief Executive of LVS, said last month in comments to journalists in Singapore that the loss of Cotai 7 and 8 was not a major setback for his company. He added it was looking to expand its Marina Bay Sands operation in Singapore and had asked the government there for more land.
