Sentosa, Marina IRs get pricier

 

Both are revising costs upwards for 2nd time

SINGAPORE’S two integrated resorts (IRs) are getting increasingly expensive, with both developers revising their cost estimates upwards for a second time.

Construction in progress at Marina Bay Sands, certain section of which are expected to open by year’s end. It was announced last week that the IR project is now estimated to cost US$5.4 billion, up from previous estimates of US$3.6 billion and US$4.5 billion. — ST PHOTO: ALPHONSUS CHERN

An additional $590 million will need to be pumped into the kitty for the Sentosa project, while the price tag for the Marina Bay Sands development has gone up by US$900 million.

Resorts World at Sentosa yesterday revised the cost for the 49ha resort in its earnings call, bringing it up to $6.59 billion. This is the second time the budget has been revised: It was bumped up from $5.2 billion to $6 billion in November 2007.

Marina Bay Sands will cost more as well. At last week’s earnings call, Las Vegas Sands Corp announced its Singapore IR is estimated to cost US$5.4 billion, an upward revision from previous estimates of US$3.6 billion and US$4.5 billion.

No explanations were given by Sands for the increase in cost, but it raised US$2.1 billion last November in a rights issue to cover its projects, including the one in Singapore.

Resorts World at Sentosa chief executive officer Tan Hee Teck said yesterday that additional funding would come from operating cash flows when the casino resort opens next year.

The extra money was needed for improvements to the design of the casino project, he said. Areas which were tweaked included pedestrian flow, the monorail stop at the resort and adjustments to the 24 attractions.

He said: ‘We want to make sure each and every attraction is up to standard. We found we needed more money to bring the attractions up to a superlative level.’ Moreover, construction costs had risen sharply in the last few years, he added. Steel, for example, rose from $800 per tonne in 2007 to $1,800 last year.

CIMB-GK Song Seng Wun said it was simply bad timing that the IR projects were awarded at the peak of the construction boom, which led to costs spiralling upwards.

Construction projects awarded earlier do not benefit from prices softening since the global financial meltdown, as they had locked in materials at a higher rate, Resorts World’s Mr Tan said.

Despite the revision in budget and the ongoing global recession, Mr Justin Tan, managing director of parent company Genting International, said he is ’still as confident’ in the success of the project.

As travellers trim their budget to take in short-haul travel, visitors from China and India who may have splurged on trips to Las Vegas or Europe would head to Singapore instead, he added.

Resorts World at Sentosa is slated to open on schedule by March next year.

One section of the resort is due for completion next week when its first 11-storey hotel, the Maxims Tower, is topped off. It will be the first development to be completed at either of the IRs.

Marina Bay Sands is expected to open in the fourth quarter of this year. However, it is uncertain which parts of the resort will be ready as Las Vegas Corp said only ‘certain features’ are targeted to be ready by December.

The resort has applied to the Government for a staggered opening, but has yet to receive official approval.

Source : Straits Times – Feb 2009

Integrated resort on course for year-end opening

MARINA Bay Sands, Singapore’s first integrated resort, is on target to open at the end of the year, its president, Mr Nigel Roberts, said yesterday.

His comments come after recent reports which raised the possibility that the resort would not be completed on time as a result of the global downturn.

Mr Roberts said the resort is seeing ‘tremendous’ demand for its facilities.

The 77th UFI congress in 2010 is so far the only confirmed event announced to the media.

But there are more on the way. The integrated resort has received around 78 ‘expressions of interest’ for meetings, incentives and conventions up to 2014.

It has also received more than 60 enquiries about its exhibition facilities for shows up to 2011, spanning industries such as maritime and semi-conductors, luxury consumer goods and textiles.

When asked about the take-up of retail space, resort vice-president George Tanasijevich said it was continuing to target high-end tenants.

He declined to elaborate further.

Source : Straits Times -  Feb 2009

Govt may let IRs open in stages

But operators must fulfil obligations; no change in their projected benefits to job scene, economy

THE Government is considering requests by both integrated resort (IR) operators for their openings to be made in stages, Senior Minister of State for Trade and Industry S. Iswaran told the House yesterday.

Both operators will also be held to fulfilling their obligations as outlined when their bids for the projects in Sentosa and Marina Bay were submitted, he said.

He added that the Government does not expect any change in the contribution that both projects will have towards the economy and job scene here.

Mr Iswaran was responding to questions from Non-Constituency MP Sylvia Lim and Nominated MP Eunice Olsen on when the IRs will fully open and whether the global financial crisis will have any impact on their ability to operate.

The recent financial crisis and the resulting credit crunch have affected several United States-based companies, including Las Vegas Sands, whose Marina Bay project here is slated to fully open next year.

Mr Iswaran noted that not only had the casino operator raised an additional US$2 billion (S$3 billion) in capital, but also its chairman and chief executive officer Sheldon Adelson had made a public declaration of his commitment to the Singapore project.

Although Sands had promised to complete the entire development by the end of next year, it has since submitted a proposal for progressive opening instead.

This is now being considered by the Singapore Tourism Board and other agencies involved.

Mr Iswaran said that Resorts World at Sentosa, which is scheduled to open in 2010, also applied for a progressive opening, and this is being reviewed too.

But he assured the House: ‘Even as we do so, our expectations remain that each development will open as an integrated resort and not just as a stand-alone casino.’

There will also be terms and conditions which the operators must abide by should their requests be approved, he added.

Although a company’s financial capability and its ability to get credit were a factor in determining the award of the projects when the IR bids were first sought, Mr Iswaran reminded the House that ‘we are now in profoundly altered circumstances’.

Still, he said both companies have assured the Government that their financing has been secured.

Mr Iswaran had already made it clear last week that the Government will not step in to bail out the IRs should their parent companies go under.

But when asked yesterday if Singapore investment company Temasek Holdings will step in, he said: ‘I think that’s a question for Temasek. It’s a commercial company – they make their own decisions.’

Ms Olsen also queried him on whether the Government had relaxed its ruling on the gaming area restriction in allowing Marina Bay Sands to have 1,000 gaming tables instead of the 600 that were originally proposed.

Mr Iswaran refuted any suggestion of a government concession.

The restriction has always been on the floor area for the casino – which has to be less than 3 per cent of the entire resort, he stressed. And that requirement remains unchanged.

In response to Ms Lim and Ms Olsen’s questions on the benefits that Singapore stands to gain from both projects, Mr Iswaran said that the Trade and Industry Ministry is standing by its projections ‘for now’.

These projections are that there will be 20,000 jobs generated directly by the IRs, and a further 30,000 to 40,000 jobs created indirectly by their operations here.

Projections that the IRs will contribute $5.4 billion to the economy were based on the projects being in a ’steady state’ in 2015 after they have been fully developed and open, he said.

But Mr Iswaran added that whether that can be achieved in 2015 is something that the ministry will have to ’study and see’.

Source : Straits Times – 18 Nov 2008

IR : Not a question of if, but when

IRs expected to meet economic targets, albeit with impact from crisis

THE promise, when the Government decided to allow the Integrated Resorts (IRs) in, was a $1.5-billion increase in our Gross Domestic Product (GDP) and 35,000 new jobs – but will these economic rewards now materialise? And if so, when?

In response to questions by Nominated MP Eunice Olsen and Non-Constituency MP Sylvia Lim yesterday, Senior Minister of State for Trade and Industry S Iswaran said the projection remains that the Marina Bay and Sentosa IRs, when they are “fully developed and running”, will achieve their economic targets and create as many as 40,000 jobs.

But whether these will be achieved by 2015 – as originally expected – “is something we will have to study and see”, he said.

“It would be fair to say that due to the global financial crisis and the slowdown already evident in our tourism sector, there may be some impact on the integrated resorts’ business when they open.”

Another issue: Marina Bay Sands (MBS) had announced that its proposed casino floor plan, which had upped the number of gaming tables from 600 to 1,000, had been approved. Ms Olsen wanted to know if the Government had made concessions to its original position.

Mr Iswaran noted that the provisions stipulated all along that up to 15,000 sq m of MBS – within the 3 to 5-per-cent limit of their over 500,000 sq m total area – could be set aside for gaming activities. There has been no change, he added, reiterating that “each development will open as an IR and not just as a stand-alone casino”.

Both MBS and Resorts World at Sentosa have requested for a “progressive opening” and their proposals are now being “carefully considered” by the Singapore Tourism Board (STB) and other government agencies, reiterated Mr Iswaran.

Both IRs had given assurances that they have secured project financing, he added, and the STB will “continue to work closely” with the operators to facilitate the developments’ completion.

Ms Olsen asked if the assurance that taxpayers’ money will not be used to bail out the IRs, can be interpreted to mean that Temasek Holdings will not step into the picture.

Mr Iswaran reiterated that would be a commercial decision to be made by Temasek.

Source : Today – 18 Nov 2008

No stand-alone casinos to be allowed: Iswaran

But govt considering IRs’ requests to open in phases

MARINA Bay Sands (MBS) and Resorts World at Sentosa (RWS) may be allowed to open in phases but will not be allowed to open as stand-alone casinos.

Senior Minister of State for Trade and Industry S Iswaran told Parliament yesterday the Singapore Tourism Board (STB) and other government agencies are considering requests by MBS and RWS to phase the opening of the integrated resorts (IRs).

‘If the requests are allowed, they will also be subject to various terms and conditions,’ he said. ‘Even as we do so, our expectation remains that each development will open as an integrated resort, and not just a stand-alone casino.’

Mr Iswaran’s comments are the clearest indication so far that even though MBS and RWS will be allowed to apply for casino licences upon spending at least 50 per cent of committed investment capital and building at least 50 per cent of committed gross floor area, this does not mean either will necessarily be allowed to open in phases.

According to the Request for Proposal for Marina Bay, if the IR is developed in phases, the public attractions at the Bayfront Promontory, the Waterfront Promenade, Event Plaza and infrastructure work must be completed in the first phase.

In response to NMP Eunice Olsen’s question on when the IR’s boost to the GDP can be achieved and whether the Ministry of Trade and Industry (MTI) anticipates the financial crisis affecting business prospects, Mr Iswaran said he expects, ‘there may be some impact’.

In 2006, when it was announced that Las Vegas Sands had won the Marina Bay site, MTI said that based on its simulation, visitor arrivals and tourism revenue from MBS could add $2.7 billion to Singapore’s GDP by 2015, or about 0.8 per cent of the GDP at that point.

When Genting International won the Sentosa site in the same year, its chairman and CEO Lim Kok Thay said RWS was expected to generate $15 billion in revenue by 2015, accounting for half of the $30 billion tourism revenue target set by STB by 2015.

Mr Iswaran said yesterday: ‘It is premature to try to ascertain in quantitative terms what the exact impact (of the global financial crisis) will be, given the volatile economic conditions.’

He was, however, more upbeat on the longer term prospects of the IRs, saying he believes they will still add as many as 40,000 jobs by 2015. This is on top of the 20,000 direct jobs created by the IRs.

Source : Business Times – 18 Nov 2008