Melco buys piece of Cotai Strip project

Jun 20, 2011 7:56 PM

A few years ago, Lawrence Ho and his partner James Packer paid Wynn Resorts Ltd. (WYNN) $900 million for a sub-concession gaming license in Macau. Since then, their company, Melco Crown Entertainment Ltd. (MPEL), has established itself as a major player in the Chinese enclave.

But showing a profit has been difficult for the company. Just this past quarter, Melco Crown reported a profit that amounted to $0.01 per share. Still, their Macau operation has continued to gain market share in the world’s biggest gaming venue.

Now, after months of waiting, Melco Crown can look forward to further growth with a property on the developing Cotai Strip in Macau.

Ho announced last week that the company is buying a controlling 60 percent interest in the Studio City project, considered one of Macau’s prime development locations.

The company said it will pay $260 million to eSun Holdings Limited, a company that reportedly has been at odds with its partner, New Cotai, a joint venture of Silver Point Capital and Oaktree Capital Management. New Cotai will receive $100 million for its share of the project.

With an additional investment of $1 billion-plus, Ho hopes to get the project underway so it can be completed before Cotai developments planned by Wynn Resorts and MGM Resorts International (MGM).

Although the projects land grant approval lasts only until 2013, Ho said he is confident the project will be extended.

"I believe the government is happy to do away with (gaming) management contracts and prefers to have us as developer and operator," Ho said.

As for the reaction among investors, Ho said, "The investors and the markets are as excited as we are." He added that Melco’s City of Dreams currently "targets more of the high-end customers while Macao Studio City will focus more on the mainland China mass market."

Lawrence Ho is the son of gaming mogul Stanley Ho and the brother of Pansy Ho, a partner in MGM Macau.