No gaming license yet for VIP hotel
The super-luxurious 13 Hotel in Macau has missed a critical deadline to open—a deadline tied to a US$384 million.
Originally the hotel was to have opened in 2016. While 13 Holdings Ltd. still maintains it will open the hotel before the end of 2017, a note from Union Gaming Securities Asia Ltd. earlier this year suggested financial hurdles may delay the opening into early 2018.
Moreover, four years after the project was launched, 13 Holdings has yet to be granted a gaming license, according to Bloomberg News. That’s significant, because the hotel’s target demographic—big-spending high rollers—prefer to stay where they can play, said Margaret Huang, a Bloomberg Intelligence gaming and hotels analyst. A onetime partnership between the 13 and gaming giant Melco Resorts & Entertainment Ltd. collapsed due to stricter regulations in the jurisdiction.
The 13’s timing is off in many ways. Other casino hotels in the gaming hub have trimmed their room rates as more supply comes online. And the days of conspicuous consumption in Macau, while not over, are no longer guaranteed after the 26-month recession that sent VIP players into hiding or running to other jurisdictions. The 13 brand is not for bargain-hunters. It features $1,500-a-night French Baroque suites and marble Roman baths for eight, along with 30 custom red Rolls Royce Phantoms for the transportation of guests.
“This hotel was exceptional in that it was positioned in the ultra-stratospheric segment,” said Ben Lee, managing partner at Asian gaming consultant IGamiX. “That market segment has long disappeared in the aftermath of the anti-ostentation campaign, and it’s a wonder they never revised their business plan and structure when they still had the opportunity to do so.”
“If the property operates as a standalone hotel, it may be difficult to justify room rates to match its high-end focus,” said Huang. “Without a casino, it would be nearly impossible to have gamblers book rooms separately.”
The uncertainty about 13 Holdings Ltd.’s $1.6 billion investment means success “is anything but assured,” reported the Washington Post—and that’s proven a problem for platinum investors like the Janus Capital Group Inc., Fidelity International Ltd., Omega Advisors Inc., the Ontario Teachers’ Pension Plan and Steve Cohen’s SAC Capital Advisors, all of which sank money into the project when it was first announced in 2012. The stock price has plummeted 92 percent from its 2013 high “to just barely above penny-stock status,” the Post reported.
But back then, it seemed like a great idea. Wall Street was dazzled by the plan for a hotel for Macau’s super-rich. It was the brainchild of former Merrill Lynch Asian investment banker Stephen Hung, who first called his company Louis XIII Holdings Ltd. and boasted he would replicate the Palace of Versailles on Macau’s Cotai Strip, with one VIP suite going for more than HK$1 million (US$128,000) a night.
“Some of the original investors had already taken haircuts to exit the project, and they were the fortunate ones,” said Lee. “The project needs more equity, as they are already up to their leverage ceiling, and future fundraising will only continue to dilute the shareholding.” The teachers’ union cut its losses, selling its stake in February.
Amid these growing concerns, a spokeswoman for 13 Holdings said the company will press on, seeking an operating licenses and working to complete the hotel and open by the end of the year. She would not comment on the company’s precarious financial situation, mountain of debts or failure thus far to land a casino license.
According to Bloomberg, 13 Holdings faces a funding deficit of about $400 million and the fleet of Rolls Royces—bought in 2014 for $20 million—have been promised to creditors, who are on the hook for some HK$4.5 billion (US$575.5 million). HK$3 billion is purportedly owed to the Bank of Communications, which set the July 31 opening deadline; BoCom declined to comment on the matter.
Hung, who continues as executive director and joint chairman of 13 Holdings, has earned HK$51.7 million in payments over last five years from the company, which also paid $HK2 billion for the hotel land to a company owned by his son.
Meanwhile, the Macau Government Tourism Office is still waiting to inspect the property, MGTO Director Maria Helena de Senna Fernandes told the Macau Business Daily.
“All documents are already approved but we’re still awaiting the request to inspect the property. Without the request we can initiate the process to grant a license,” Fernandes said.
