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Getting ahead

China Star Entertainment Ltd. agrees to sell Hotel Lan Kwai Fong Macau to former legislator Chan Meng Kam for HK$2 billion 10 days after an exclusivity period to sell the property to Paradise Entertainment Limited ended

Former MSAR legislator and local businessman Chan Meng Kam will personally purchase the Hotel Lan Kwai Fong Macau from China Star Entertainment Ltd. for HK$2 billion (US$248.71 million), a filing with the Hong Kong Stock Exchange has revealed.
According to the filing, China Star Entertainment (BVI) Limited – a wholly owned subsidiary of China Star Limited – agreed to enter a sale and purchase agreement on 10 October 2017 to sell all of its shares and shareholder loans in a group of companies that owns and operates Hotel Lan Kwai Fong Macau and 18 residential units in Macau used as staff quarters.
The agreement will allow Chan Meng Kam to take control of the three controlling companies – Charming Era, Exceptional Gain, and Most Famous – as well as their subsidiaries.
The purchase announcement comes only 10 days after a four-month exclusivity period between China Star Entertainment and Hong Kong listed gaming company Paradise Entertainment Limited ended on September 30.
The company, led by businessman Jay Chun, had entered into a letter of intent to purchase the hotel for around HK$2.38 billion.
China Star Entertainment stated that to its ‘best knowledge, information and belief of the directors’ the former Macau legislator has no relationship with Paradise Entertainment or its controlling associates.
Local businessman Chan Meng Kam is the owner of Golden Dragon Co. Ltd., a company that operates three casinos in the MSAR: Casino Taipa Square – under a licence of Melco Resorts and Entertainment Ltd. – and Casino Golden Dragon and Casino Royal Dragon – under SJM.

Selling to build
Currently, Hotel Lan Kwai Fong includes 209 guestrooms, restaurants, a flower shop, retail shop and spa centre plus gaming areas on the ground, first and 18th floor of the hotel.
Casino operations in the hotel are operated by gaming operator Sociedade de Jogos de Macau, S.A., with the main areas including 84 gaming tables for VIP and mass market gaming, together with 65 slot machines.
According to its most recent interim report, in the first half of this year China Star Entertainment hotel and gaming service operations registered an 8 per cent yearly decrease in shared revenue to around HK$334.27 million, with its hotel and gaming sector seeing a sector profit of only HK$674,000.
China Star Entertainment considered that the sale would ‘bring a strong inflow of cash’ to the group, with gains on the disposal estimated at HK$648 million.
The filing also stated that since the group’s operations in Macau had recorded losses in the last financial year the group should focus its resources upon property development and investment.
The group maintained its intent to continue developing three land plots it owns in the ZAPE district of Macau near the hotel into a ‘luxury residential and commercial complex of two towers with spacious apartment units’, with construction expected to finish in 2019 and with proper sale of the complex starting in the second half of that year.
The group also purchased half of the equity interest in a 4,669 square metre land plot on Avenida Doutor Stanley Ho, and plans to use the hotel sale gains to complete the development of the plot into a building for residential and parking purposes.