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Gaming resort may net 15.2% return
Last Updated(Beijing Time):2007-01-17 16:13
CapitaLand Ltd, Southeast Asia's biggest property developer, said it expects a 15.2 percent annual return on its investment in a US$2 billion Macau gaming resort.

Taubman Centers Inc, a United States-based shopping-mall operator, will be an equity partner for retail in the project, said Cheng Shin How, who runs CapitaLand's operations in Hong Kong. Marriott International Inc will run hotels under its Marriott and Ritz-Carlton brands, he said in Singapore yesterday.

The development will give CapitaLand a stake in the biggest gambling market in the world that has attracted global operators including Las Vegas Sands Corp and Wynn Resorts Ltd. In 2006, Macau's casino resorts raked in an estimated US$6.8 billion, overtaking the Las Vegas Strip, which took in US$6.5 billion, according to Morgan Stanley estimates.

The business model of casino resorts that includes retail, convention centers and hotels "has been proven to work in the US, and I think Macau is certainly building towards that," said Simon Smith, senior director of research and consultancy at Savills Hong Kong Ltd. "We're looking at a very young, very aggressive developing market with a concept that's quite new to Asia."

CapitaLand said on January 9 it will pay US$84 million for a 20 percent stake in Macau Studio City. The project will be funded by internal resources, as well as bank borrowings or by tapping the debt market if necessary, Chief Financial Officer Olivier Lim said.

"The way Macau is being developed as the Vegas of the East, the economics of the real estate make a lot of sense," said Kee Teck Koon, head of CapitaLand's commercial development unit.

Singapore-based CapitaLand is buying the stake from eSun Holdings Ltd, a unit of Hong Kong developer Lai Sun Development Ltd. ESun will own 40 percent of the project. The remainder will be owned by a group of US-based investors, including Silver Point Capital LP and Oaktree Capital Management LLC.

The shareholders are evaluating different "exit" strategies for the project, including an initial share offering and "joining" a company that has a real estate investment trust, Kee said.

Macau Studio City will consist of theater, television and film production facilities, and will offer retail, gaming, entertainment and hotel services, CapitaLand has said.

The development, to be built on Macau's Cotai Strip, will have a gross floor area of about 600,000 square meters, according to the company.

CapitaLand wants to replicate the resort model, with convention centers and malls, in other cities, where it has residential, retail and commercial projects.

The developer is also looking at emerging markets such as Vietnam, said Wong Heang Fine, chief executive officer of its integrated leisure, entertainment and convention business.

A casino resort will be a "tourism driver," said Wong. "We hope to secure adjacent land that we can bring in our other strategic business units, such as residential, so that the financial viability of the project is a success."

Source:Shanghai Daily 
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