Melco Crown Entertainment (MCE) announced a purchase of a majority interest in Macau Studio City, the long-stalled project near the Cotai ferry terminal. Melco Crown will acquire the 60 percent equity in the project owned by eSun Holdings for $260 million. The company will pay an additional $100 million to New Cotai Holdings, which will retain 40 percent equity in the project.
The payment to New Cotai Holdings may be seen as a settlement of a lawsuit the partner initiated against eSun. Silver Point Capital, L.P. and Oaktree Capital Management, L.P., investors in the original deal, wll apparently participate in the New Cotai interest.
Lawrence Ho, co-chairman and chief executive officer of MCE, says the deal shows that his company is bullish on Macau.
“We believe high-quality new supply, such as Macau Studio City, will continue to drive incremental demand and broaden the appeal of the market,” says Ho. “The property’s theme and demographic focus are designed to be clearly differentiated from our existing portfolio of assets, as well as from our competitors’ facilities in the market.”
A restarted project will still need some approvals from the government, but since the major approvals have already been issued, some experts believe the government is likely to put the project in the fast lane. Several companies are expecting approvals from the government—Wynn Resorts, MGM Resorts and SJM—and could be further delayed by this development as the SAR seeks staggered openings of subsequent IRs.
The existing table game cap should also not be a concern because it expires in 2013, with the earliest opening of Macau Studio City being 2014.
The Studio City is located across from the Cotai immigration point, which includes a ferry terminal and a future light-rail station. In addition, the time-consuming land preparation, including the driving of pilings, has been completed. Ho says the deal was attractive because of the site.
“The project’s location is a tremendous competitive advantage, adjacent to the Lotus Bridge and a key stop on the planned light rail system,” says Ho. “Additionally, we believe Macau Studio City’s existing land grant and previously completed site work will allow us to significantly expedite its construction timetable.”
MCE granted the original concession to Studio City, so the casino will now be operated by the company without any change in terms.