Opening expected this month
The 13 Holdings Ltd., developer of the 13 Hotel in Macau, announced last month that it has agreed to sell its construction unit to fund completion of the property near the Cotai district, reported GGRAsia.
In a filing to the Hong Kong Stock Exchange, the company said it sell its 51.6 percent stake in Paul Y. Engineering Group Ltd. for HKD300 million (US$38.4 million). The company indicated it would record a loss of HKD338 million on the sale.
Precious Year Ltd., a wholly owned subsidiary of Hong Kong-listed ITC Properties Group Ltd., is buying a 45.76 percent stake in Paul Y. Engineering for HKD265.2 million. The remaining stake is being bought by Tycoon Bliss Ltd., a firm wholly owned by Chan Fut Yan, deputy chairman and an executive director of Paul Y. Engineering, for HKD34.8 million.
About 48.23 percent of the shares of Paul Y. Engineering is owned by PYI Corp Ltd., a Hong Kong-listed engineering and construction services company based in China.
In the filing, the 13 Holdings said “it is timely for the disposal to take place so that the management team can focus more of their time on the hotel management business of the group and the group’s resources can be effectively utilized for the hotel management business after the opening of the 13 hotel. The disposal provides funding to finance the completion of the facilities and amenities of The 13 hotel as well as pre-opening costs of the 13 hotel.”
The proceeds have been allotted to pay for “furniture, fixtures and equipment, operating supplies, inventories and staff costs, debt servicing and the general working capital of the group.”
In a separate filing, the 13 Holdings said it is now in “the process of obtaining the necessary licenses for the operational and soft-opening phase of the 13 hotel,” which is expected to open in the second half of 2017, possibly sometime in July.
For the year that ended March 31, 2017, the 13 Holdings reported a net loss of HKD45 million, compared to HKD197 million in 2016, with consolidated revenue from its engineering business of about HKD6.13 billion, down 10.1 percent year-on-year.
In a note, Union Gaming saw more delays in the offing—and consequences for the company. “The timing of the opening of the 13 continues to be uncertain and we believe is dependent on the company being able to access financing in order to finish construction,” said the brokerage. “Under the assumption that the company is able to raise sufficient capital we would not be surprised if the opening were to slip into early 2018 given the time-consuming process of restarting what has become a stalled project.” Union Gaming also noted that the elite property may miss out on much of the VIP surge in Macau.
“Opening at the end of the wave of new construction puts the company at a disadvantage as it will be materially more difficult to compete against new supply that has a much longer head start than had initially been anticipated,” it wrote. “The delay is particularly painful given the market rebound, especially at the high end where the 13 is positioned.”
The Nikkei Financial Times wrote that former banker and 13 founder Stephen Hung is losing a lot of money in the bargain. Hung “has bought 30 Rolls-Royce Phantoms painted in ‘Stephen Red,’ sent butlers to Paris for training and hired a direct descendant of Louis XIII to advise on French luxury” for the $1.3 billion property, but faces numerous hurdles before it can begin to recoup the massive investment.
“In addition to its financial and construction problems, the 13 will need to sign a deal with one of Macau’s six casino concession holders to operate its gaming facility,” reported the Times. “Then it needs to secure licenses from the local government for each table, at a time when Beijing wants to slow the rate of expansion of the enclave’s casino industry.”
