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LAS VEGAS-Las Vegas Sands said Monday that it has made the initial US$87.5-million payment for two of five additional parcels in Macau, a special administrative region of China. The parcels are envisioned as five interconnected integrated resorts. The total payment for the first two parcels—known as parcels five and six—is US$380 million. Beyond that, the company will pay an additional US$500,000 annually while the first two parcels are under development and US$2.1 million per year upon completion, according to a Monday filing with the SEC.

Las Vegas Sands owns three operating casino resorts in Macau–the Venetian Macao, the Sands Macao and the Plaza. Sands Macau opened in 2004, followed by the Venetian Macau in 2007 and then the Plaza in 2008. It also owns CotaiArena, Macau’s largest entertainment venue and one of the largest convention and exhibition halls in Asia, and one of three major high-speed ferry companies operating between Hong Kong and Macau.

The company’s next phase of development is parcels five and six, for which it plans a 13-million-square-foot, US$4.3-billion integrated resort that would be completed in three phases, the first phase of which is partially completed. After that, it would develop one of the three remaining parcels with an additional 3,900 branded hotel rooms, and then it would develop the final two parcels with a project similar size and scope to the integrated resort located on parcels five and six.

“Our ultimate plans for Cotai include five interconnected integrated resorts, which leverage a wide range of branded hotel and resort offerings to attract different segments of the market,” the company stated last week in a filing with the Hong Kong stock exchange in advance of the IPO for its Macau operations, which it recently spun off into a wholly owned subsidiary. “When complete, we expect our Cotai Strip development to contain over 20,000 hotel rooms, approximately 1.6 million square feet of meeting, convention and exhibition space, over two million square feet of retail malls, six theaters and other amenities.”

The IPO of a 30% stake in Sands existing and future operations in Macau is expected to generate nearly US$3.6 billion. Sands intends to use the proceeds to repay debt and restart construction in Macau. “We began construction of Parcels 5 and 6 in 2006 and suspended construction in November 2008 due to the global economic downturn,” the company states in the required filing. “We plan to restart construction of Phases I and II with a portion of the proceeds from [the IPO], together with supplemental financing that we are currently seeking to obtain from a group of lenders.”

Last week, the company provided additional detail with regard to the supplemental financing, explaining that Sands Macau has been seeking commitments for US$1.75 billion in project financing and recently received commitments from a group of commercial banks and financial institutions to provide US$1.45 billion. The company says it is actively seeking commitments from other commercial banks and financial institutions to provide the remaining US$300 million in financing.

Construction is expected to resume in January. The company estimates it will take 18 months to compete the first phase and an additional six months to complete the second phase hotel tower and an additional 24 months to complete the remaining retail facilities planned for the second phase. As of mid year, Sands had capitalized construction costs of approximately US$1.7 billion for the two parcels. If the supplemental financing is obtained, it expects to spend an additional US$2.2 million to complete the first two phases.

The US$2-billion first phase of Parcels 5 and 6 would include 3,700 rooms in two hotel towers [flying Sheraton, Shangri-La and Traders flags], 300,000 square feet of casino area and approximately 1.2 million square feet consisting of retail, entertainment and dining facilities, meeting space and a multi-purpose theater. The first phase also includes the structural work for an adjacent 2,300-room Sheraton hotel tower that would be fit out in the $190-million second phase along with some of the remaining retail facilities. The US$443-million third phase is slated to include a luxury St. Regis-branded hotel and condo-hotel tower.

Macau, a special administrative region of China, is the only place in the county where gambling is legal. The gambling industry there started in 1962 when the government issued a single license to Stanley Ho. The monopoly ended in 2002 and several licenses were handed out. In 2006, the market surpassed Las Vegas as the world’s largest gaming market.

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