Inside Asian Gaming

October 2014 inside asian gaming 33 an economic boost from tourism may rescind the ban, possibly this year, and Mr Lee believes he may have timed his entry just right. It wouldn’t be the first time the stars have aligned for the Guangzhou native, who started out buying South Florida foreclosures during the recession of the early 1980s and banked a pile of cash when upwards of 1,000 US mortgage lenders failed in the Savings & Loan Crisis, one of the worst financial scandals in US history, presenting him with a veritable banquet of distressed real estate. He still runs a US company specializing in non-performing assets. Then came his decision to help bankroll the launch of budget hotel chain 7 Days Inn in 2005, which dovetailed perfectly with China’s burgeoning affluence. Merrill Lynch, Deutsche Bank and Warburg Pincus all bought in. The company went public on the New York Stock Exchange in 2009 and today runs more than 2,000 hotels in 300 Chinese cities. In July 2013, China’s privately held Plateno Hotel Group, whose backers include The Carlyle Group and Sequoia Capital, added the chain to its portfolio of luxury, boutique and mid-market brands. His 7 Days venture was grounded in part in an Asia-focused, but US-based, private-equity firm he founded called CS Capital USA. It’s also a US vehicle, NewCity Capital, that’s behind his investment in The Grand. CS Capital also attended the birth of Iao Kun Group. Its forerunner was Mr Lee’s CS China Acquisition Corp., which early in 2010 merged with Macau VIP room promoter Asia Gaming & Resorts to create Asia Entertainment & Resources Ltd., which is now Iao Kun. It was a good time to shop a junket on Wall Street, probably the best time, though none had dared it before. AERL went public on Nasdaq in July 2010. As it turned out, the global financial crisis was rapidly fading by then from the Chinese scene, and Macau VIP was primed to reach revenue heights in the next three years that may never be seen again. Today, Mr Lee is looking to replicate his success in US real estate with a Chinese land acquisition company called SK Development, and he continues to explore the country’s appetite for US-style retail with ventures such as Officebox, a chain of office products superstores. “My business model,” he says, “is the same exactly as Office Depot, Staples, but we localize them, mix themwith Chinese culture.” He’s also bought into an auto rental company in China called Reo Car, hoping to catch fire in a market that is expected to double in value to US$11 billion over the next few years. The largest retailer in the space, CAR Inc., went public in Hong Kong in September and raised HK$3.62 billion in one of the largest IPOs on the HKSE in months. And there is your background in gaming in Macau through Iao Kun, and in hospitality in China, both obviously considerable assets. Yes, I have some background, certainly. They must be happy to have you involved. That’s what I’ve heard from the board, and from the management, yes. You like the current management? Yes, yes. I am working with the management team. I’m on the board of ACDL. And I’m working together with the other board members to make this successful. It doesn’t appear that you’re going to be a silent partner by any means. I will actively be involved, yes. I’m not going to be silent. Not to classify The Grand as such, but your track record from the beginning reveals a decided pull toward distressed assets. You were buying South Florida real estate in the middle of the S&L crisis. Yes, yes, I’m glad you say that. I don’t know. I’ve been doing that for 30 years. It’s the same thing. I buy a property; it might be empty; that’s why you’re buying at a good price. They don’t have the income, it’s empty. Then after I buy them, the question is, what can I do? Am I able to fill them up, increase the rental? Same thing. I like non-performing assets. Is it that history that drew you to The Grand? Yes. That’s one of the reasons. The next Insights reason is because of the gaming. Gaming is sort of a really unique industry because it’s limited resources. It’s not when you have money then you get a license. It’s not that. Let’s say Singapore: they only have two, they’re not going to issue any more. In Macau, for now, they only have six, they’re not issuing more. That makes it unique and special. “I will actively be involved. I’m not going to be silent.”