Las Vegas Sands had to wait five years to resolve a problem created with the intention of selling apartments located in the tower of the Four Seasons.
The apartments were completed in 2009 but only in 2013 did the government accept a solution that did not call into question an essential issue of COTAI: all the land in this landfill is public and, if converted to private, would remain under the concession. Thus, how would it be possible to sell apartments situated on land which in 2035 will in principle return to the public domain?
LVS wanted “to sell co-operative interests in the tower in a manner similar to the way apartment units are sold in New York City and other international locations,” but since this announcement in 2008 up to 2013 the apartments have remained empty.
Only in 2013 did the government authorise an entity called COTAI Strip Lote 2 Apart Hotel (Macau), a Venetian COTAI subsidiary, “to sell the usage of the Four Seasons apartment tower through a co-operative plan. Under this design, buyers will hold shares in a legal entity that controls the property, with each sale of shares for each apartment unit subject to government approval.”
The then Secretary for Transport and Public Works, Lau Si Io, assured that the order left no doubt: “It is very clear that this transmission is done only for the purpose of investment. The Government is very clear in this; The Venetian has to be the largest shareholder of the project and we also tell the company that it cannot transform it into a project of sale of real estate. It has to be an Apart Hotel as referred to in the concession. It’s all according to the contract.”
But if this case was resolved – from the government’s point of view, beyond doubt – other issues related to the distribution of land in COTAI were never, and probably will not be, clarified.
Take into account some statements made by Pansy Ho, general manager of MGM in 2009 to Macau Daily Times (an interview as unusual as it is revealing). Regarding the process of granting land in COTAI by the government, Stanley Ho’s daughter said: “Everything is unclear, nobody notices. There are no rules that guide us,” advocating a more transparent system, such as the one in Hong Kong. “Everyone will simply talk to the Chief Executive. If the Chief Executive promises [a piece of land], what you have to do next is to write to him to remind him of the matter and hope, at the same time, you can start working on the preliminary plan. Then don’t hold your breath. We have taken all these steps and we’ve been waiting for two years.”
Pansy Ho referred to the process of granting land to MGM, accusing the government of handing over too much land to Galaxy. “If the government believes that there’s no room for more hotels or casinos and therefore does not assign land to other concessionaires, why do they do so in relation to an entity that has not even fulfilled its original obligations?”
More questions from the MGM General Manager: “Why did the government give them all the land that could be immediately capitalised for the development of gaming and did not give it to other operators who have already submitted requests and who are ready to move forward with their investment?”
According to the accounts made by Pansy Ho (2009, it is insisted), Galaxy and Las Vegas Sands together had more than 70 per cent of the land awarded in the gaming sector by the Macau SAR Government – in all, 1.5 million square metres. By contrast, Melco received 16 per cent, SJM 8 per cent, Wynn Resorts 4 per cent, and MGM 3 per cent.
“This is not a myth, nor is it an issue that people can pretend to ignore,” said Ho, also a director of MGM and Shun Tak. “And now, should we ask for land from Galaxy? If we want to expand our operation in Macau, should we ask for land from Galaxy?”
It has been eight years since these accounts, in some cases already outdated, but things have not changed significantly, either for LVS or for Galaxy (and thus for all the others). When Galaxy announced plans in 2015 to more than double its investment in its integrated resort, Chairman Lui Che Woo said: “We have the largest land bank and it’s to our advantage. Even after its next phase opens in May this year, it will still have an equivalent area of land to build on [Phases III and IV, with opening dates this year or the next].
Power of the land
What immediately results from reading this chart, even if some cases lack rigor, is the huge disproportion between the various players: some with everything (Galaxy occupies almost 20 per cent of COTAI) while others have very little.
|Concessionaire||Land (in square metres)||Observations|
|Las Vegas Sands||560,000|
|Melco||City of Dreams – 113,325
Studio City (Phase I) – 130,787
|SJM||70,468||(Plus 180,000 from an agreement with Angela Leong regarding land intended for a theme park )|
|Shun Tak||248,488||(Unfulfilled concession, only announced by Shun Tak)|
|Plots 7 & 8||110,000|
(Sources: In the absence of an official source telling us how many metres each operator has, we use news and reports published on the Internet)
How it works
“In February 2007, the Company received the final draft of the land concession agreement from the Macau Government pursuant to which the Company was awarded a concession by lease for parcels 1, 2 and 3 on the COTAI Strip, including the sites on which it is building The Venetian Macao and the Four Seasons hotel. The Company has accepted the conditions of the draft land concession and has made an initial premium payment of $106.5 million towards the aggregate land premium of $323.7 million. Additionally, $24.1 million has been paid or will be paid in the form of the cost of the reclamation work and other works done on the land and the installation costs of an electrical substation with the remaining amount payable over time. The land concession will not become effective until the date it is published in Macau’s Official Gazette. Once the land concession is effective, the Company will be required to make additional land premium and annual rent payments relating to parcels 1, 2 and 3 in the amounts and at the times specified in the land concession. The Company has also commenced construction on its other COTAI Strip properties on land for which it has not yet been granted land concessions. If the Company does not obtain land concessions, it could lose all or a substantial part of its investment in these other COTAI Strip properties.”
(from LVS 2007 Annual Report).