MGM To Open New $2.6bn Casino In Macau

admin, October 19, 2012 10:20 am

MGM To Open New $2.6bn Casino In MacauMGM Resorts International has signed a deal to build a new HK$20 billion ($2.5 billion) casino resort in Macau in a 7.2 hectare (17.7 acre) plot of land in the Cotai district. The land itself has cost the company $161.4 million and during construction, MGM must pay $269.4 million in annual rent, which will then rise to $681.4 million after completion. Commenting on the deal, MGM China said the “development of the Cotai land will offer compelling growth opportunities in the future.”
Currently, MGM China Holdings Ltd, along with Pansy Ho, owns the MGM Grand Macau casino (photo) which it opened up in 2007 at a cost of $1.25 billion. However, the company doesn’t have a presence in the increasingly popular Cotai district, which it now hopes to remedy by building a 1,600 room hotel casino, complete with 500 gambling tables and 2,500 slot machines. As Bank of China International analyst Edwin Fan explains:
“Getting the approval to build its first casino in Cotai will help to broaden MGM’s customer base, luring the mass market which provides a higher margin. The company has already secured project financing for the development, but there’s a high chance it will cut its dividend payout ratio.”
The project is expected to take around 3 years to complete and it is hoped the new development will help boost the market share of MGM China, which currently is the lowest of Macau’s six casino operators. Meanwhile, Sands China already has three resorts in Cotai with a  fourth planned for the future, while Wynn secured a land deal several months ago and intends to build a $4 billion resort on the Cotai strip.
The enclave of Macau was rented by the Chinese to Portugal in 1557 and by 1887 had become a Portuguese colony. On  December 20th, 1999, however, it reverted back to China and soon after its gambling market was opened to foreign operators. By 2006, Macau’s gambling revenue was the biggest in the world and last year the resort raked in $33.5 billion in gambling revenue, roughly five times that of the Las Vegas Strip.

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