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Macau tycoon David Chow is ripping up the fake volcano and Roman amphitheatre that were the show pieces of a failed theme park he built in the Chinese gaming enclave seven years ago.
He is replacing them with something a little less kitsch and more in keeping with the neighborhood: a casino resort boasting an opera house and dinosaur museum that he hopes will return him to the spotlight of the world’s largest gambling hub.
The second-generation casino operator, whose four decades of Macau experience rival former kingpin Stanley Ho, is going up against the industry’s modern titans, including Sheldon Adelson’s Las Vegas Sands Corp and Steve Wynn’s Wynn Resorts Ltd who have built massive casino, hotel and shopping complexes that rake in billions of dollars each year.
“It is my time to come now,” said Chow, 62, whose Macau Legend Development Ltd listed on the Hong Kong stock exchange in July, raising $283 million, less than half of what was initially planned.
Chow, a former Macau politician, has kept a low profile since the failure of the theme park, which he built with Ho. In his absence, Macau has been transformed with sleek glass towers, Michelin dining and luxury brand flagship stores.
Only a decade ago, the former Portuguese colony was a gangster’s paradise where rivals regularly settled disputes with guns. China has sought to turn it into a safe, family-friendly resort city. It granted gaming concessions to the Las Vegas elite such as Sands, who opened glitzy casinos that dwarf the older ones surrounding Chow’s property.
With the IPO proceeds funding his upcoming casino resort, Chow hopes to remind Las Vegas rivals that he is still a force to be reckoned with.
For investors burned by Chow’s last big dream, grand plans may sound all too familiar. Merrill Lynch and U.S. hedge funds Och Ziff and TPG-Axon were among backers who plowed $400 million into the theme park in 2006, recouping only around a third of their investment three years later.
It turned out that visitors preferred the air conditioned comfort of Macau’s many casinos to the heat and pollution of Chow’s outdoor park.
“We were never wrong,” Chow said in an interview in Hong Kong’s Central business district. “For me it was a park. We are not making money there. It was a gift to the society. Now we are going to build the park into a resort.”
‘Times Have Changed’
Chow, whose mother ran multiple VIP gambling clubs in the 1970s for Stanley Ho, will have plenty of competition with six casinos scheduled to open in the next three years just as his comes online.
“David went away and did what he had to do, reorganize,” said a former investor in Chow’s theme park who declined to be named due to company policy. “He’s well connected in Macau so maybe he can make it work but it’s a hard model to execute. You are competing with the mega casinos.”
Competing projects are being built on the nearby Las Vegas-style Cotai strip, where Sands has already become a powerful force with 1,500 gaming tables, 9,000 hotel rooms, an apartment complex and multiple high-end retail outlets.
Chow, who was a legislator for 13 years until 2009, said his new resort will help diversify Macau, drawing a contrast between his more culture-focused development and the sprawling “boxes” that the Las Vegas titans are building on the Cotai strip’s reclaimed stretch of land.
The property he is redeveloping, known as Fisherman’s Wharf, sits on Macau’s crowded original peninsula, where Ho’s lotus-shaped Hotel Lisboa & Casino dominates the skyline. The wharf’s dusty volcano is visible from the approaching ferries bringing Hong Kong visitors to the arrival terminal right next door.
“In 2005, when David Chow and his team toured me through the Fisherman’s Wharf construction site, it felt like a mega project in comparison to tiny, village-like Macau. Times have changed. Macau has boomed,” said Matthew Ossolinski, chairman of Ossolinski Holdings, a global emerging markets fund that invests in casinos and other gambling-related companies.
Macau is the only place in China where nationals are legally allowed to gamble in casinos. Traditionally reliant on “big whale” spenders who drop up to 1 million yuan ($163,000) per bet, Macau’s casinos are now seeing rapid growth from the “mass market” crowd who come primarily to gamble but are increasing their spend on retail, dining and five-star hotels.
Gaming revenues surged 21 percent in June to $3.54 billion, according to government data, about half of what Las Vegas generates in a full year.
Macau strictly limits the number of casino licenses, so Chow’s gaming operations are done through a service agreement with Ho’s SJM Holdings Ltd. SJM also runs his existing faux-baroque Legend Club and Pharaoh’s Palace casino, where customers are greeted by giant sphinx heads and gilded columns.
In His Blood
Chow said his experience gave him an edge in attracting customers. He helped develop Macau’s VIP junket model, which extends credit to wealthy Chinese gamblers, and worked as a junket operator in Las Vegas, bringing in high-rollers.
“I have the blood for gaming,” he said with a laugh.
Chow is known as a prolific gambler himself: he was in a long-running dispute with Steve Wynn over nearly $5 million in gambling debts, and eventually settled out of court.
“To be a casino operator or be in the industry, you have to know what is gambling,” Chow said.
He hopes his focus on diversification and Macau’s former Portuguese heritage will be enough to sway the government to grant him a total of 500 gaming tables. Competing casino projects are also vying for tables under a strict cap imposed by the authorities.
Manuel Neves, head of Macau’s gaming body, said the government had promised support for Chow’s project, including the casino operated under SJM’s license, but did not specify how many tables he would be granted.
One of Chow’s biggest backers is Dynam Japan Holdings Co Ltd, a Japanese pachinko company, which put $35 million into the IPO as a cornerstone investor.
Yoji Sato, Dynam’s chairman, said the Macau Legend investment would give his company “valuable know-how in the entertainment and casino business in Macau”. He declined to comment on Chow’s previous theme park failure.
Macau Legend has enough money to start the casino development without needing to raise more until next year, said Sheldon Trainor, the company’s executive director. It would likely seek debt financing rather than issuing new shares, he said.
Chow, an active investor in African agriculture and honorary consul in Macau for Cape Verde, also plans a development on neighboring Hengqin island.
Aware that his expansion plans are ambitious, Chow seems undeterred.
“After this IPO they (casino rivals) understand this is the David Chow now. They forget me a long time.”
Additional reporting by Stephen Aldred. Editing by Emily Kaiser.
Copyright (2013) Thomson Reuters. Click for restrictions