Residential development ban on Cotai may not be absolute

The ban on residential development on Cotai announced by Land, Public Works and Transport Bureau Director Jaime Carion last week may prove less absolute than implied. Zach Coleman Friday, September 02, 2005 The ban on residential development on Cotai announced by Land, Public Works and Transport Bureau Director Jaime Carion last week may prove less absolute than implied. Even at the time Carion announced the ban to Macau reporters, he cited with approval plans by Melco International Development and Publishing & Broadcasting to include 'apartment- style' hotel units within their HK$8 billion City of Dreams casino resort. Carion said Galaxy Casino's Cotai resort development plan also included acceptable apartment-style hotel rooms, but cited with approval revised development plans by eSun Holdings that omitted previously approved homes. The result has been confusion about what Macau will still allow in Cotai now that the area has been redesignated as a tourism and entertainment zone instead of a residential district as originally planned. It's an important question as revenue from apartment sales could provide a helpful funding source for casino resort developers and enable them to recoup their project development costs more quickly. 'At this time we are still trying to clarify what is going on,' said Bill Mok, chief financial officer of Hong Kong-listed Far East Consortium International. Far East plans to build a HK$2.8 billion complex with five hotels, a casino and a huge shopping mall as well as 33,260 square meters worth of serviced apartments. JPMorgan property analyst Raymond Ngai has projected the company will recoup HK$900 million from selling the apartments. Mok said: 'If they say no residential development at all, that will affect our project.' So far, that doesn't seem to be the case. Deutsche Bank gaming analyst Marc Falcone wrote in a research note that the residence ban 'does not apply to casino development projects as planned, and excludes timeshares, condo hotel projects and serviced apartments connected to major hotel developments... Second homes and resort developments would be permitted.' Carion's blessing is particularly important for the Melco-PBL joint venture. The JV plans to start pre-sales of 142,000 sq m worth of serviced apartment timeshares in mid-2006. Analyst Aaron Fischer of CLSA forecasts the sales will bring in HK$2.3 billion. Only shortly before Carion's speech, Las Vegas Sands announced it would include 600 serviced apartments with the Four Seasons hotel it is building in Cotai and more serviced apartments with two resorts it will build across the street. Shangri-La Asia chief executive Giovanni Angelini, whose company is negotiating to manage one of those two resorts, said last Friday that the prospective Shangri-La Macau would not include serviced apartments. A spokesman for Las Vegas Sands declined comment. Regal Hotels International Holdings executive director Poman Lo said the new policy would affect tentative company plans to allocate up to 10 percent of its HK$2 billion-plus Cotai resort for serviced apartments for expatriates. But she said this would not have a significant financial impact as the company will have sufficient revenue from other projects to fund its Macau venture. ESun told its shareholders in July that, despite its development plan revisions, it would still seek approval to build 30 detached houses on its Cotai site in a joint venture with sister company Lai Fung Holdings. Asked whether Carion's comments would scotch that move, eSun chief executive Mark Lee said he could not comment due to guidance from the Hong Kong Stock Exchange. (from The Standard HK)