Scientific Game

A Macau style casino in the US?

Best Sunshine President Mark Brown explains how a US$7 billion investment fits US Pacific island Saipan’s 50,000 people and 500,000 visitors

Friday, 22 April 2016 15:44
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By Muhammad Cohen, Editor At Large,

Mark Brown reentered the Asian Gaming 50 last year to the theme from Mission: Impossible. President and CEO of Best Sunshine in Saipan, Mr Brown was hired to implement a US$7 billion integrated resort plan without development sites or funding on a remote speck in the Pacific. Best Sunshine’s parent company, Hong Kong listed Imperial Pacific International, is majority owned by Cui Lijie, who has family ties to Macau junket promoter Hengsheng Group. Imperial Pacific terminated a revenue sharing deal with Hengsheng in October. Saipan is part of the Commonwealth of the Northern Marianas Islands (CNMI) with broad self-governing powers and visa-free entry for mainland Chinese. It is located closer to Beijing than to Hawaii. That led some to believe US regulations on money laundering wouldn’t apply in Saipan but US$78 million in fines levied last year against CNMI’s Tinian Dynasty casino, upheld in court, confirmed US regulatory reach. Best Sunshine is working with CNMI’s newly formed Commonwealth Casino Commission (CCC) to forge groundbreaking rules to make Macau practices, including VIP profit share, compatible with US law.

Since joining Best Sunshine in November 2014, Mr Brown – the Las Vegas Sands Macau president who opened Venetian Macao and an alumnus of Trump Casinos in Atlantic City, Wynn Resorts in Las Vegas and NagaCorp in Cambodia – has acquired land in Garapan, Saipan’s tourist heart, to build Grand Mariana, a Paul Steelman designed casino hotel scheduled to open late this year. He made a partnership deal with Japan’s Kan Pacific for the site of its aging Mariana Resort, a massive 161 hectare (398 acre) plot that the government will offer to lease for 40 years into 2058 next month.

Perhaps most stunning, Mr Brown opened Best Sunshine Live, a temporary casino in Garapan’s DFS T Galleria mall, with 34 mass tables, 12 VIP tables and 106 slot machines. For 2015, with the casino open just over five months with only two months of full operations including VIP play, Best Sunshine reported gaming revenue of HK$707 million (US$91.2 million) and adjusted EBITDA of HK$121 million. November through February monthly VIP roll averaged US$1.82 billion.

In his Saipan office, Mr Brown updated Editor at Large Muhammad Cohen on his progress in America’s Pacific frontier.

IAG: With Best Sunshine, it’s impossible to ignore that big number, US$7.1 billion. It’s especially difficult since you’re talking about an island with 50,000 people and half a million annual tourist arrivals that’s four hours from anywhere. Not just US$7.1 billion, but the proposed 4,252 rooms, 300 villas, 1,600 gaming tables and 3,500 slot machines: what makes those numbers right for Best Sunshine and Saipan?

Mark Brown: I’ve heard the US$7 billion number. Our plan is actually more than that. I take a step back as I’m talking to investors. Look at what we’ve done from the temporary facility, generating these numbers with a small number of tables inside a shopping mall in Saipan. That’s step one.

We are building and got approval in full for a US$500-to-600 million property across the street, Grand Mariana, which will have between 400 and 500 slot machines, about 250 to 300 table games and 374 suites. The beachfront piece is modeled after the One and Only resort in Dubai. This will open up at the end of this year, call it New Year’s Eve grand opening, basically the casino block, beach front, mass gaming floor, junket rooms, ballroom and restaurants. The hotel block will continue to be built and will open in the first quarter of 2017, call it April for full building opening. Now that’s building one, and I look at that as a beautiful Sands [Macao].

The second one is our big property, which will be roughly 1,000 rooms, roughly cost US$1 billion. So property one, property two, anywhere between a billion-five and two billion, that’s how we are looking at it. We are going for the RFP [Request for Proposal] in May for the parcel of land.

IAG: That’s Kan Pacific’s Mariana Resort site?

MB: Correct. We have a full blown plan for that site. But my point is that US$7 billion dollars is a plus-plus-plus. It is an investment from our company, but it doesn’t have to all come from us. We can have partners joining us from other gaming companies, hotel companies. It’s US$7 billion worth of investments. I keep saying, we’re going to spend and invest more than that. But it’s not a US$7 billion building that we are building on Saipan – and that’s how it’s been written – Grand Mariana, US$7 billion property. No, we are not building City Center [MGM’s US$9 billion Las Vegas project] right out of the gate.

I use the example of LVS [Las Vegas Sands, in Macau], where I came from. There’s the Venetian, there’s the Parisian and you have the Four Seasons in the middle with a partnership there. Across the street, St Regis, Conrad, Sheraton … same thing, where we could own one or two and the other five, six or seven are all other owners, exactly like how it is in Macau.

IAG: How does the deal Best Sunshine signed in December with Kan Pacific to cooperate through the term of its lease expiring April 2018 fit in?

MB: It was a partnership agreement that, if we were awarded the RFP, we would partner with them and where they will also continue on with us. If they want to build a Japanese hotel on our site, they could do that, maybe we could get on the land sooner, and we’ll all do business together. We still want the Japanese market here, so for a Japanese company to build a Japanese hotel on our land, that’s great. 

IAG: Under the agreement, they won’t bid on the site?

MB: I’m not sure if they will or not, but they already know what our plan is. So if they are going to bid US$80 million to fix up their resort, that’s not going to be any competition to what we are planning on doing on that site.

AMERICA’S COTAI
IAG: That will be 1,000 rooms?

MB: In one building, and we plan on having 20 buildings. The site is huge. That’s a city, our version of the Cotai Strip with 11 hotels and nine casinos, villas and homes and condos, the largest water park in the world, shopping. It’s an astounding site.

IAG: Where do you stand with financing Grand Mariana and beyond?

MB: For Grand Mariana, as I told the [Commonwealth Casino] Commission, the funding is done. We have the money already for the US$500 million property. We raised in the very beginning US$350 million. We sold the Hengsheng junket piece; that was US$50 million. We are very transparent here. We have to show the Commission everything.

IAG: So now what’s the relationship between Best Sunshine and Hengsheng?

MB: Now, absolutely nothing. That’s sold, that’s out of our company. Now there’s zero.

IAG: How did you finance the rest?

MB: The US$300 million was raised by equity and convertible bonds. We raised US$100 million three times, then US$50 million from the junket stake.

IAG: And you can build Grand Mariana if you don’t raise another dime?

MB: Correct.

IAG: Let’s talk about the temporary casino. Any revenue figures to share?

MB: We publish our rolling numbers, starting November, the US$1.6 billion, the US$1.5 billion, the US$2.2 billion and the US$2 billion in February. We’re very proud of these rolling numbers. Our seven [VIP] tables went to eight, went to 10 and now there are 12. But we did our billion-six and our billion-five, over US$3 billion rolling on seven tables, which astounded all of us.

On slot machines, we’re roughly winning anywhere from US$200-to-300 per day. And normally we’re winning US$3,000 a day on the tables on the mass floor. Slot machines and mass tables somewhat average to US casinos, and our VIP are off the charts.

IAG: Where do VIPs come from?

MB: Mostly from mainland China..

IAG: And they come because of their relationship with Ji Xiaobo?

MB:  The bright side is who’s coming to the island now, and why can’t I have a room more than one night. In our vicinity, there’s 2,800 hotel rooms, and they’re 100% occupied, seven days a week. Anywhere from US$200 to US$400 a night, filled.

Chinese, Koreans, Japanese who come to the island right now. They’re here for three days, swimming, snorkeling, shopping, eating. For a four-five hour trip, if you’re coming from Beijing, Korea, Shanghai, Japan, this is heaven. We have a 50% [visitor] return rate.

The mass, I think, will come once Grand Mariana opens and our 370 rooms are in. There’s actually another 1,000 rooms being built on the island. There’s a 200 room Korean hotel, there’s a hotel called E-Land [branded Kensington] being fixed up – that will be another 300 rooms, which will help us.

Again, I want to keep reinforcing the transparency that we have here. So all the stories that you hear in Macau, over the table, under the table … Here we have no gaming tax – that’s the main point ... zero gaming tax, so we’re very transparent, we’re following all the AML [anti-money laundering] laws. We know the federal government’s eye is watching. On hiring practices, following all the US rules. We are following all the laws, CTRs [cash transaction reports], and know your customers, KYC, following all those laws.

That’s why customers are coming from mainland China. There’s something about the US that makes everyone feels safe. Not only safe on the outside, but feel safe on the games. They know we are highly regulated, so it makes them feel comfortable. I’m not saying other jurisdictions are not, but you don’t know.

Here, we are very closely regulated, so the customers who are betting US$600,000 a hand know that the game is real, all the nines are in there.

VEGAS SCHOOLED
IAG: You see being part of the US as a competitive advantage?

MB:  I do. I went to a graduating class yesterday. UNLV [University of Nevada - Las Vegas] sent two experts here to train the CCC. So they trained their whole staff, a few of our compliance people, it’s like 40-something graduates. In a very short time they’re learning a lot. They want to do well; they want to learn. Were they local business owners before or farmers? Yeah, but they are very articulate, they want to do the right thing. They talked to Atlantic City, they talked to Vegas, they talked to Singapore, they talked to Australia and then they went and took two classes at UNLV and then they paid a lot of money for UNLV to come here and train them.

IAG: So you’re comfortable, confident that you have 100% compliance?

MB: We have a huge compliance committee, and we have people here that are on this every single day. We just hired a gentleman named Vic Choi, who was the head of compliance for HSBC in China for many years. He is with us now on the corporate level, based in Hong Kong but here now. I introduced him to the Casino Commission, and they love the fact that we have somebody of that caliber who is now heading up our compliance department.

Yes, I’m very comfortable now with what’s happening. We have the right people in place. Everyone is fully aware, the cage, the dealers, everyone’s been trained on AML law, trained on CTR, trained on suspicious activities.

We are not sitting here doing whatever we want. The outside world has to know this. We are in the US. So it’s like Las Vegas, like any casino on the Strip. Whatever they are doing, that’s what we are doing. We are in the same place.

Because it’s very convenient for the mainland Chinese customer to come on a four-five hour flight, no visa, and come in and play, we’re fortunate enough to have a Commission that’s investigating and following up and finding out if it is possible for us to have a Macau style casino in a US territory. [Asian] customers come to the Las Vegas Strip, yes, but they don’t have it [there] because they’re so few and far between … it’s too far. Here, guys are hopping on our private jet, and they’re here. So we can have it, whereas Vegas can’t do that because they don’t have the activity.

IAG: What do mean by “Macau style casino,” and what’s the compliance impact?

MB: What’s happening now, what’s approved, is an individual rolling program. Everyone understands the slot card: put your card in and earn points, and you can buy food, you can buy gifts with that. It’s the same thing. It’s a rebate program on the table. That’s what the rolling program is, dead chips turning over. We are paying 1.3% of that total roll. That’s what this person gets. And that’s on an individual basis. So I’m giving an individual customer US$1 million credit, he plays and, in time, he turns it over, I give him his commission rebate and that’s it. He goes home. That’s been going on since we opened, this rolling program which the Commission fully approved. I grant that individual credit, and they get a rolling program.

IAG: Is the rolling program available for cash, too?

MB: You can start off here with a US$20,000 [cash] rolling program. It’s tiered. Right now that’s 1%, then it goes up to 1.1, 1.2 … 1.3 is a certain number and above. So anybody can join, from US$20,000 and above.

Now the Commission has approved step two. They are now allowing us to give rolling credit, and you distribute money to the four people you brought with you. You can call that an agent [program]. You’re bringing your four-five people with you, you’re giving them money to play with. Again, I reinforce, we know who those four-five people are because we have their passports, we have their identification, we know everything about them, but I’m only dealing with you on credit. I’m still rating everybody, but I give you US$5 million; [if ] you want to give them all a million apiece, it’s up to you. The Commission’s approved that.

So now we have 10 applications on file that have been submitted to the Commission that they are going to investigate. Is this person here a junket rep in Macau? Does he work in Korea, or even the US? If they are affiliated in the US or Macau, they’ll look at that and give a little benefit if they are already working in Macau. Once our first agent is approved – we haven’t started that yet – but once the Commission gives their full approval, then we’ll have that, and, honestly, that will be the first in the US. To really have a program where I’m giving one gentleman credit, and he is giving money to play with to these people he brought with him. But I’m only dealing directly with the agent [as far as credit goes], so that’s step one and step two.

As we get closer to getting [Grand Mariana] to open, our goal, and the Commission knows this, once they’re used to the 1.3 individual then we want them to get comfortable with giving one person credit [to distribute]. Then we’ll talk about profit sharing, where it is exactly like Macau where I’m going to give not only the one person – not a junket company – whatever amount of credit we give, and we work on a profit sharing basis, whether it is 60-40 like Macau, 70-30 like wherever else, I’m hearing some are even 85-15 out there now.

IAG: So it’s not junket companies. You could, say, give the credit to [Suncity Group Chairman] Alvin Chau ...

MB: Correct. We’re not giving rooms to anyone. There’s not the Neptune Room, the Suncity Room ... it’s basically first come-first served, and if Alvin Chau wants to bring 10 of his guys with him – I hope he does, we’ll give Alvin whatever he wants – and all the people that he brought, we know who they are. Again, no one plays on these tables that we don’t know who they are.

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