The Mandarin Oriental hotel plot on a prime site opposite the Sands Macao casino could be redeveloped either as a stand alone casino or as apartments following its expected acquisition by Dr Stanley Ho’s leisure conglomerate Sociedade de Turismo e Diversoes de Macau (STDM).
Although the 25 year old property has been refurbished twice within two years, the need to retain the site as a five-star hotel has diminished as a new 213-room Mandarin is being built on a waterfront site in Macau and is due to open in 2010.
The likelihood of a change of use for the ‘old’ Mandarin increased after last week’s announcement that Mandarin Oriental International, the operator of the hotel chain of that name, and the property developer and ferry operator Shun Tak Holdings (another Stanley Ho company) are selling their respective 50 percent interests in the 416-room ‘old’ Mandarin to STDM. The deal is due to be come into effect at the end of May and is said to have cost STDM HKD1.6 billion.
The fact that analysts say the purchase price is equivalent to 40 times the hotel’s HKD40.4 million pre-tax earnings from last year and 19 times the hotel’s HKD83.7 million net asset value as of 31st December, suggests Dr Ho and his advisers see serious profit potential in the site.
As part of the deal, the sellers have the right to share any increase in the hotel site’s value above the sale price if the property is redeveloped or sold to a third party in the future.
It’s not clear at this stage whether the ‘old’ Mandarin would be demolished or adapted. One option might be to turn it into a VIP focused casino resort at relatively modest cost. The ‘old’ Mandarin already has a casino on the premises operating under an SJM licence. It used to be known as the Casino Oriental, but was reopened a fortnight ago under the management of Dr Jack Lam’s Jimei Group with the title Jimei Casino. Dr Lam is one of Macau’s leading VIP gaming room operators, with facilities in the Grand Lisboa, MGM Grand Macau, The Venetian Macao and Wynn Macau. Jimei also operates the Fontana casino in the Philippines and Seven Luck casino in South Korea.
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