Macau approves $3 billion Wynn Cotai resort

The Macau government has approved a new 51-acre casino resort on the Cotai Strip, a subsidiary of Las Vegas-based Wynn Resorts Ltd. announced late Tuesday.

Wynn Macau Ltd. said the government of the Chinese gambling hub has published formal approval of the land concession contract, paving the way for construction to start.

"The official transfer of real estate in Cotai makes possible the commencement of the construction phase of what will be the single-most important project in the history of Wynn Resorts," Steve Wynn, chairman and CEO of Las Vegas-based Wynn Resorts said in a statement Tuesday.

Wynn said that the company is mindful of its responsibilities to "the citizens and government of Macau" and that the roughly $3 billion hotel resort in Cotai will "mark a new standard of elegance in the world."

Under the contract, Wynn Macau will lease the Cotai land from the Macau government for 25 years with renewal rights. In addition to a $193.4 million land premium payment, Wynn Macau is required to pay $771,738 a year in rent during the development phase and
$1.08 million a year in rent once development is completed.

The company already operates Wynn Macau and Wynn Encore resort in Macau. Wynn Resorts' Chinese casinos generated $765 million in operating income last year.

Wynn Cotai is expected to cost at least $3 billion. The resort, featuring about 2,000 hotel rooms and 400 gaming tables, is likely to open sometime in 2016, said Deutsche Bank gaming analyst Carlo Santarelli in a note to clients.

"We view today's announcement as a meaningful positive for Wynn as it provides a much-needed growth story and likely alleviates concerns over other popular Wynn-related topics right now," Santarelli said.

Those other topics include the legal dispute between Steve Wynn and the company's co-founder, Japanese tycoon Kazuo Okada. The dispute is related to Wynn's $135 million donation to the University of Macau Development Foundation and questions about the company's financial affairs.

The company has countered that Okada provided improper gifts to Philippine gaming regulators in connection with a multibillion-dollar project in Manila Bay. Wynn has alleged those gifts were in violation of the U.S. Foreign Corrupt Practices Act. Wynn Resorts also is facing five shareholder lawsuits that generally allege the company has been hurt by the dispute with Okada.

Santarelli expected Wynn Cotai to generate $675 million in earnings for the company in 2017, adding $23 in equity value to Wynn shares.

Major gaming companies have increasingly invested in Asia in recent years, with massive profits in return.

Wynn's approval to build its Cotai project comes less than a month after Las Vegas Sands Corp. opened its $4.4 billion Sands Cotai Central casino. Las Vegas-based MGM Resorts International and Hong Kong-based Galaxy Entertainment Group also operate casinos in Macau.

Also on Tuesday, Galaxy Entertainment announced it would spend $2 billion to double the size of its Macau resort by 2015. Shares of Wynn Resorts were set to open today at $134.71 on the Nasdaq.

Contact reporter Chris Sieroty at csieroty@review
journal.com or 702-477-3893.