Ho and Packer reveal Macau casino plan

Duo acquire rights to a 25-year renewable lease on the Cotai Strip for $214 million.

Six months after signing a joint venture, gambling magnates Stanley Ho and Kerry Packer have announced plans for an underwater casino in Macau. The duo sealed a deal with the Macau Government last week acquiring rights to a 25-year continuously renewable lease for 113,325 square metres of land on the Cotai Strip.

The JV - between Australian Kerry Packer's Publishing and Broadcasting Limited (PBL) and Ho's Hong Kong listed Melco International Development - will pay $214 million for the land, which includes a land development premium of about $64 million payable to the Macau authorities.

The amount will be funded by the JV through debt financing and existing equity.

The pair also outlined plans for their resort development which features an underwater casino hall showcasing tropical marine life and capable of housing 450 gaming tables and 3,000 slot machines.

The proposal includes two 4-star hotels and one 5-star hotel with a total of 2,000 guestrooms, and two blocks of deluxe serviced apartments. An upmarket shopping mall and a 4,000-seat performance theatre top off the resort plans.

Construction will begin towards the end of this year, with an expected completion date in mid-2008, though no details of how much the development will cost have been given.

Discussions are now under way for the casino to be operated by Sociedade de Jogos de Macau (SJM), Ho's company which holds one of three gaming licences in Macau.

When complete, the new complex will compete with several other casinos on the Cotai strip. Since the enclave began issuing new casino licences in 1999, several international gaming companies have identified Cotai as the location for the development of a new breed of casinos. Two Las Vegas moguls are said to be working on resort complexes on the same strip of reclaimed land.

The JV between Ho and Packer was designed to give Ho more equity to beat off these US competitors, while giving Packer a foothold in Asia.

Ho's SJM still accounts for more than 70% of Macau's gaming market.

Meanwhile, Packer attracts plenty of Asian high-rollers to his casinos in Australia. He owns the Crown Casino in Melbourne and last year paid A$637 million for the Burswood casino in Perth.

Gaming now accounts for about 40% of PBL's revenues. Last financial year, Packer made A$375.6 million in profit from his casinos. In the first half of the 2005 financial year, PBL reported EBITDA of A$228.5 million from its gaming operations, an increase of 39.6% on the corresponding period.

Gaming analysts say Macau has already surpassed Las Vegas as the most lucrative casino market in the world. In the first four months of this year, Macau's gross receipts from gambling were up by more than 20% to $1.7 billion.