Inside Asian Gaming

INSIDE ASIAN GAMING | July 2008 44 Oceanus Mark 2 A slimmed down waterside casino could be the key to SJM’s fortunes SJM’s jewel (or at least jade necklace) in its post IPO crown is likely to be Oceanus, a multi level casino planned on the site of the ‘old’ New Yaohan shopping centre in the Outer Harbour area. It will be connected to the peninsula’s ferry terminal and heliport by an air-conditioned walkway. SJM’s plans for Oceanus have been scaled down dramatically from the majestic mixed use casino, shopping and apartment complex STDM originally commissioned from the prestigious French design team of Paul Andreu Architect Paris in 2006. At that time, press reports estimated the cost at US$799 million. Now it’s been redesigned as a more functional gaming property with a reportedly modest HK$1.11 billion (US$140 million) price tag. Top designer The good news is that Paul Steelman,the award winning casino designer responsible for the Sands Macao and Macao Studio City, confirmed on a recent visit to the city that he has been contracted by SJM to design the interior and façade of Oceanus. He said that although the project had been scaled back to a “more realistic design,” it shouldn’t be assumed that the original ship-like design has been discarded. What changed that demanded an 82% cut in the original budget? An obvious two-part answer is the market and the availability of money. Dr Ho and his board will have looked down the road at Cotai and seen the (so far) modest performance of The Venetian Macao and the drag it has put on LVS finances. He will have looked up in the sky at Macau’s construction cranes and seen the way commodity prices and labour costs have soared, and he will have looked at the local equity market and seen the cash raising potential of an IPO fall dramatically in the last 12 months. New or recycled? Acynicmightwonderwhether thewhole “cluster” plan is just a case of SJM disguising its own caution on Macau and relative lack of cash by repackaging old projects and selling it as a bold new strategy. The long-expected SJM Cotai resort appears to have been reduced to a comparative footnote in the IPO prospectus as “two mixed-use developments” with a commitment only to preliminary plans and no clear timetable. “SJM has prepared preliminary plans for, and applied for the necessary land concessions in relation to, two mixed-use developments in Cotai; one development would be situated directly across from the new convention centre and the other development would be adjacent to the Macau East Asian Games Dome,” says the document. Whether SJM’s casino “cluster” plan is a case of IPO necessity being the mother of invention, or a far-sighted attempt to forgo the ‘build it and they will come’ strategy adopted by SJM’s competitors, time will tell. Strategic locations Work on the new slimmed down Oceanus is expected to start in the second half of 2008, says SJM. One of the other likely partner venues for that Outer Harbour “cluster” is the neighbouring SJM-licensed Jai Alai. How such a cross- promotion scheme will work in practice remains to be seen, as this property is currently looking rather tired and is only sparsely peopled with customers to put it mildly. The Macau Palace, a floating SJM casino once anchored nearby, was formerly popular with local fishermen and had a distinctive scent to match. It was closed and removed from the dockside in October 2007, reportedly for renovation, though whether it will be returned to that location and reopened is not yet clear. The “cluster” strategy may be aimed primarily at mass customers, who may be short on time and money and therefore may prefer to stay close to the ferry terminal. A hint of this comes in the prospectus. “A number of SJM’s casinos, such as Casino Jai Alai and Casino Oriental, are located near key transport gateways, including the Macau Maritime Terminal, in order to target single day visitors, tour groups and vacation travellers,” it states. The mother ship Another SJMcasino“cluster”will be in the area around the Lisboa and Grand Lisboa. The document states: “SJM plans to redevelop and expand the Hotel and Casino Lisboa into a multi-purpose development, which may consist of residential apartments, a shopping mall, spa facilities, hotels and convention rooms. Furthermore, SJM plans to develop other gaming operations in the Lisboa District, including L’Hermitage, which will be an exclusive club style casino. The above plans are subject to relevant government approvals and finalisation of commercial terms.” SJM is reportedly planning to spend HK$1.8 billion to complete a hotel tower at the Grand Lisboa and a further HK$250 million on L’Hermitage. The other area highlighted in the prospectus is the Inner Harbour District, where SJM has a 51% equity interest in the developer of Ponte 16. This is a mixed use development featuring a casino, a five-star hotel with conference centre managed by France’s Accor Group under the Sofitel brand, restaurants and shops. The hotel is due to open next month. The original concept for Oceanus, which has since been scaled down