拉斯維加斯金沙集團 (LVS) 2005 Q3 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the third-quarter 2005 Las Vegas Sands earnings conference call. My name is Angela, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be conducting a question-and-answer session towards the end of this conference. (OPERATOR INSTRUCTIONS).

And now, I would like to turn the presentation over to your host for today's call, Mr. William Weidner, President and Chief Operating Officer. Please proceed, sir.

Thank you, Angela, and good afternoon, everyone. Thank you for joining us today. With me here in Las Vegas are Sheldon Adelson, Chairman of the Board of Las Vegas Sands Corporation; Brad Stone, Executive Vice President; Scott Henry, our Chief Financial Officer; and Rob Goldstein, President of the Venetian here in Las Vegas.

Before we begin, I need to remind you that today's conference call contains forward-looking statements that we're making under the Safe Harbor provision of federal securities laws. I would also like to caution you that the Company's actual results could differ materially from the anticipated results in those forward-looking statements. Please see today's press release under the caption forward-looking statements for the description of risks that may affect our results.

In addition, we may discuss adjusted EBITDA and adjusted EBITDAR, which are non-GAAP measures. A reconciliation of those measures to the most comparable financial measure is included in the press release. Please note that this presentation is also being recorded.

Las Vegas Sands Corp delivered another solid operating quarter, driven primarily by outstanding results in Macao. As we continue to make progress in our development activities in Las Vegas, Macao and other markets worldwide.

In Las Vegas, the Venetian achieved record third-quarter EBITDA results producing 64.6 million, an increase of 8.6% from third quarter '04. Table volume was strong, as table volume increased 12.5% and hold came in at above the norm. High-end table volume at the Venetian increased largely due to our activities in Macao coupled with the opening of our Paiza Pub at our 9,000 square foot Chairman Suite. The increase in high-end volume occurred without any change in marketing cost structure related to that high-end play.

We continue to be the pacesetter for room occupancy and average daily rate for the Las Vegas market. We've led the way since our very beginning. We're delighted to see room rates across the market catch up. And with the largest, most luxurious rooms in Las Vegas, increasing rates give us headroom to further increase our own rates.

The pace of our four group bookings gives us confidence that our room demand will continue to accelerate with rooms booking for the fourth quarter up 26% from last year and 54% for November and December. The fall is our second-largest quarter, surpassed only by the first quarter. For example, occupancy in October came in at 99.6%.

As for 2006, group room nights booked to date are 29% ahead of last year's pace. Of note particularly, we pre-booked group room nights to an increase of 87% for next year's third quarter. We pre-booked a much stronger base of group business for third quarter next year, giving us greater pricing leverage next year for the remainder of our room inventory.

We continue to make targeted capital expenditures at the Venetian to drive both group and FIT demand going forward. As it relates to the group market, we're adding 300,000 square feet of new space this week with an additional 150,000 square feet coming online in January. These additions increase the amount of carpeted space by 50%; that takes the maximum number of meeting rooms from 180 to 330. These enhancements combined with the fact that we essentially create our own demand through bookings at the Sands Expo and Convention Center leave us well-positioned to continue to drive business going forward by providing greater pricing leverage and increased booking flexibility.

The 29% increase in forward group room booking pace certainly highlights the benefits of this additional meeting space.

As it relates to the FIT enhancement, in recent weeks, we opened two high-profile entertainment venues -- TAO, the Las Vegas version of the high-energy New York restaurant and nightclub and the popular Blue Man Group production show. TAO opened to a strong consumer response, filling a need at the Venetian for more nighttime entertainment offerings. A modified and enhanced Blue Man Group will serve as an important cash flow generator and has the potential to draw more than 3,000 patrons to the Venetian on a daily basis.

And in 2006, we will open "Phantom of the Opera" in another beautiful theater built specifically for that presentation.

Longer-term, construction of the Palazzo Casino Resort remains on track for a summer 2007 opening. Importantly, we remain focused on building the project cost effectively. We do not expect a material impact from rising construction costs, as about 50% of our construction costs for The Palazzo, including the volatile steel and concrete contracts, are hard bid. And our China-based purchasing subsidiary is achieving favorable buys.

Shifting now to our Sands Macao property, we turned in an exceptional performance on all fronts there, experienced substantial growth both in VIP and mass play as well as slot volume. Revenues in gaming volumes are up significantly, driving record-adjusted EBITDAR to 90 million for the quarter.

We're seeing strong momentum in our VIP play, which further confirms our confidence that we can continue to improve our market share in the highly competitive Macao market. We only formally launched our VIP business in March. In fact, in that relatively short period of time, we've established a solid foothold to the premium segment, while cautiously but determinedly approaching our activities in that development of this very important market segment.

Third-quarter Rolling Chip volume increased to $3.2 billion, a sequential increase of 60% from last quarter and up from 0 last year. And rolling volume exceeded 1.4 billion in October, making it a record month for the property in Rolling Chip volume.

While focusing particularly on VIP play, our business remains strong in the mass segment, as we introduced promotions and royalty programs aimed at this segment. Third-quarter mass table drop reached 11.1 billion per day; that's up from 10.1 million per day in the second quarter and 9.5 million per day in the first quarter and 10.6 million from last summer's quarter. In October, we saw mass table play drops increase to further 11.9 million per day, as last October's was about 11.6 million. These increases took place despite mass table capacity increases of 70% from last year.

Third-quarter slot handle grew nearly 80% versus a year ago to 190 million also in the face of an increased capacity, about 35% in slot capacity in the marketplace. The Sands continues to be the mass market leader, the fastest-growing segment in the Macao market.

Our podium expansion, which will add 200 tables, a 54% increase to the current capacity and 230 slots, a 31% increase to current capacity, remains on track for an August 2006 opening. The first phase of our podium expansion involving 25 additional tables and 23 additional slots will open first quarter 2006 in time for the Chinese New Year. The addition of 225 total tables will allow us to focus on mass-market table customers we currently do not choose to serve, the 100 to 200 Hong Kong dollar; that is $12.50 to $25.00 per hand better. In addition, we're adding Chinese fast food capacity to better attract and serve this market.

Clearly, we have a fantastic platform from which to expand our presence in Macao. To that end, we're working hard on the development of the Cotai Strip, Asia's Las Vegas. Construction at the Venetian Macao Resort, the anchor property of the Cotai Strip, remains on track by summer 2007 opening. The level of demand that we're seeing for the 1.2 million square feet of convention space and over 1 million square feet of retail space, two key components of our Cotai strategy, exceeds our own aggressive expectations.

As we announced last week, our convention and tradeshow marketing team in Macao, led by Wolfram Diener, who came from the Shanghai Exhibition Center, and coordinated with our sales management's team here in Las Vegas is already generating results. Almost two full years before the Convention Center opens, we've lined up a prestigious group of tradeshow organizers committed to developing 20 shows, ranging from 5,000 to 20,000 attendees for the 2007/2008 timeframe. This level of interest in developing tradeshows for our Exhibition Center in Macao is certainly beyond what we expected at this early date and speaks volume about Macao's potential to become a leading meeting, incentive convention and exhibition destination in Asia.

Demands for our retail mall space exceeds our expectations, and our negotiations are progressing swiftly. We expect to be able to make announcements over the coming weeks and months on the specifics of that progress as we sign deals for specific retail space commitments. We plan to monetize our non-core real estate assets in Macao just as we did in Las Vegas when we sold The Grand Canal Shoppes to General Growth Properties. This remains a key initiative for our Company. There is huge real estate asset value to be realized in our Cotai developments.

In other Cotai Strip development activities, yesterday, we signed a binding, definitive management contract agreement with Shangri-La Hotels. And we have exchanged detailed deal memorandum with the Four Seasons, Hilton, and Starwood under the Sheraton brand hotels to manage other hotels we're developing on the Cotai Strips.

Our development partner on parcel 3, Far East Limited, has signed memoranda of understanding with InterContinental and Holiday Inn Hotels. We're now documenting our definitive agreement with the Far East. In addition, we have submitted our final plans to the Macao government in connection with calculating and consummating our land concessions for the Venetian Macao and the Four Seasons' parcels.

We're convinced that the potential for the future in Macao is enormous, and we have positioned ourselves to be the dominant factor in capturing maximum value from the totality of that potential. We recently were selected by the Chinese government to master plan the construction of a full-fledged resort development on Hengqin Island, a 5.2 square kilometer parcel of land located just 1 mile from the Cotai Strip. While we have begun our initial site investigation and planting activity, Hengqin represents a long-term development opportunity for us, and we do not anticipate any significant cash requirements for this project until after the opening of the initial phases of Cotai. We are highly enthusiastic about this opportunity, which we view as a strong endorsement from the government. It will provide important complementary amenities to the Cotai Strip and will advance our objective of bringing the full Las Vegas-style resort experience to the doorstep of China.

The addition of the Hengqin Island property allows us to be in a position to reap the full range of rewards, accruing to accomplishing our objective of mirroring the success of Las Vegas model on the doorstep of a burgeoning China, an economy that continues to grow its GDP, a 9.4% rate through September 2005 on top of a 9.5% GDP growth rate for 2004 and its exports, a 31.3% growth rate so far this year on top of a 34% increase in 2004. Cotai is just nothing short of a fantastic opportunity that we plan to take full advantage of.

Worldwide, we remain active in other development activities here in the U.S., particularly in Bethlehem, Pennsylvania as well as in the U.K. and Singapore and in other regions.

With that initial opening, I would like to open it for questions and answers. As I mentioned before, we are all here to answer your question. Brad Stone is here to talk in detail on the operations side. Our Chairman, Sheldon Adelson, and our Chief Financial Officer, Bob Goldstein is here also. We are all here and prepared to answer any questions you might have about our third-quarter results.

Can I make a comment about something you said, Bill?

Certainly.

Bill, I don't know. It may have slipped through everybody's mind when you said it, but you said we increased our meeting room capacity from the number of meeting rooms we had approximately 170 now to 330. Just fyi, 330 is the largest convention complex in the world and is more meeting rooms than all the hotels combined in cities like San Francisco, Los Angeles, San Diego, Dallas. We have studied those; we have done the research and now we're studying New York, Chicago and other major cities. And I suspect that that threshold will (technical difficulty). So we are ready for questions and Q&A. Operator?

There is one thing we probably want to clarify in terms of the press release then. Why don't you go ahead and do that, Scott?

One page 2 of the press release in the first paragraph under Sands Macao third-quarter operating results, in the last line on the page, the sentence reads that table games drop was 1.021 billion in the third quarter of '05, up from 923 million in the second quarter of 2005. The press release says an increase of 8.3%, and that's an increase of 10.6%. So we apologize for that misstatement.

Okay with that, is our operator available to come back on and start moderating this Q&A?

All right, maybe we should ask ourselves questions. How's that?

Well, I will extend what I was talking about before. The 330 meeting rooms allows us to take the biggest groups in the world, where we can seat 50,000 people simultaneously, which gives us greater assurance that our rooms at the pipeline for groups will be very, very vibrant, very exciting.

To expand on that when we look into next year, for example, right now, we have 46% of our room capacity already on the books for the first quarter of this. So of our total room nights available in the first quarter, 46% are already committed to the group business, almost 50% of our room nights. Towards the second quarter, obviously a little further out, we are at 37%. So we have a strong base of rooms going into the first half of next year because of the additional capacity we have online and because of our extraordinary group booking pace that we are seeing.

As Bill mentioned earlier, we're up significantly in the third quarter. We chose to be more aggressive. When we looked at the third quarter this year, we anticipated a little stronger pop from the Wynn Resort; it was a robust growth but not as strong as we had anticipated. And we are going to start with a stronger group base next year. And we believe again that will improve our RevPAR opportunities in the third quarter of 2006 above those of this current year.

Jay Coke (ph), are you on the line?

Yes, I sure am, Bill.

Well, we don't have a moderator, but we do have a two-way communication. So I guess we will pick you out. You have the floor. Do you have a question, Jay?

Yes, I sure do. I thought you guys were singling me out or something like that. But I do have a couple of questions for you on Macao. With respect to VIP, you obviously had a huge sequential uptick in terms of drop. By my kind of rough calculation, it seems like you had about 9% market share roughly for the third quarter.

9.7, Jay.

Can you talk a little bit about -- let's talk a little bit about what happened in the period in terms of signing up more junkets? Was it just more play on a per player basis? Just a little bit more color on that.

And if maybe you could also just reiterate what you were saying in regards to both the mass volume you saw on a per day basis and the monthly numbers you saw in October on the VIP side? I just want to make sure we have those numbers correct.

The attraction is our good looks and charm.

We continue to focus on that business. We brought the assets online just about a year ago. And we have continued to grow our junket representation. I mean with every trip you go to the Macao property -- and we are there quite often -- we see a much stronger nightly growth in terms of the number of visitations to those rooms.

The quality of customer continues to improve. Our challenge right now is we're actually going to be building some more rooms, some more gaming rooms up in the Paiza Club. Those of you who are familiar with the property, we're currently redesigning; we are going to take the Shanghai Restaurant and convert that to additional Paiza Clubrooms because of that additional capacity. We will maintain the kitchen facilities and have some private dining rooms there to facilitate those customers.

But we continue to see great acceptance of the property by the customer themselves. We continue to see interest in junket reps coming into the marketplace. Our commission rate is in line. We actually I think for the third quarter, our commissions were about 0.97. We typically talk about 1% being the commission rate and for the third quarter came I believe about 0.97%. So it's not because of additional aggressive marketing in terms of incentives; the incentives are certainly in line with the marketplace. So it is just continued acceptance.

We are building our own in-house team as well, so we are not solely reliant upon the junket reps. We feel we have significant upside in capturing individual travelers, particularly out of Hong Kong and out of Singapore, out of Thailand, etc. So we are developing our own in-house staff to supplement the junket representatives. That's why we're seeing this continued terrific growth.

On the math side, again, the numbers are very strong, particularly in light of the enormous mass capacity that has come online in terms of the Macao market. Certainly, the expansion that we are planning for the summer. And as Bill mentioned, the first small portion of that will open just before Chinese New Year -- allows us to go aggressively after a customer that we have chosen not to go after nearly because we'd have to lower our table limits.

Those of you who have been to the Venetian Macao, predominantly, our table limits are in the area of 300 Hong Kong, which is roughly $35. Many of the smaller casinos that have been existing have done so because they offer 100 and 200 dollar Hong Kong minimum bets. We have not been able to participate in that market because we would be bringing down our total payment limits.

So there is a significant market that is untapped for us in Macao. The growth rate in the mass market I believe has been around 45% in the last quarter. So we look for that expansion to help us in terms of that as well. So we continue to see growth opportunities both in the mass and in the premium markets.

What was the monthly October volume numbers again?

The rolling volume was --

We only disclosed one stat on October.

(multiple speakers) We had 1.4 billion roll, and we had 10.6 -- 11.6 in daily mass. So you can take the math there. I'm sorry; it's 11.9 times 31 will give you the answer.

That's what I was looking for. And then just a couple quick follow-ups. In regards to site 7 and 8; I don't know if Sheldon or Bill or somebody could provide us with just a little bit more visibility on where you are specifically. You said something about MOUs going back and forth between you and the Hilton group. Can you tell us a little bit more about site 7 and 8 and how we get the visibility about how that all works out and the timing and the economics and all to you?

This is Sheldon. I feel like the prettiest girl on campus because I've got all the boys chasing me. I just had a conversation this morning with one of the most senior executives at the Marriott Corporation, who wants to become our partner on one of the sites. I have had talks with the Chairman and the President of Starwood, and they want to become partner on our site. We've talked to Hilton Corporation; they want to be partners with us on a -- not on the site we have not discussing that yet -- but on one aspect of the development.

We also have another group that I personally have not talked to, but one of our directors has talked to them because it's the InterContinental group. They are interested in partnering with us on one of those sites. Now, I have also got another group coming in the week after next or next week, next week on the 10th, an Israeli company which is probably the biggest company in Israel, has -- they are in the hotel business, construction business, development business, etc., many businesses. They want to go partners with us in developing another site.

So that's why I feel like the prettiest girl on campus. We just have too many people, and I think what we have got to do is just understand what it is.

Oh, I have also talked with the Chairman of Hyatt, with Nick Pritzker. They want to be involved with us with the Hyatt on the Cotai Strip.

So we've just got so many deals out there, and we've only got two more lots to go forward with. That's the conundrum we are in today.

Should we expect you to maybe provide a little bit more CapEx down the road for these projects? Or do you think you are still going to do them the way you had done before with other development partners?

Well, that's what we're looking at. If we decide to go in ourselves, it's only going to be for a small amount. It is not going to be significant capital. We want to get all the benefits. We're going to pursue the strategy that we are pursuing now. There will be a combination of retail that we will own and develop and vacation suites, so let's call them service departments. So we expect that the sale of the service departments and the retail will provide a major benefit if not complete elimination of the debt that it will require to build these properties.

So we've got all these good things in front of us, and the question is -- which of the good thing is better and best? So that's the conundrum we're facing today.

David Anders, Merrill Lynch.

Scott, if you could maybe touch on two things. First, the tax rate going forward, it's a little lower than what I thought; if you could comment on that. And then also, you highlight your hold was a little high in Vegas. I choke that up to be about 10 million in revenue. Could you give some kind of guidance on what kind of EBITDA Jusa (ph) gave you?

And then lastly, Sheldon, could you give us a little more on the hard timeline though of when you would be happy to have these hotels open and when would you be disappointed?

I would be happy to open the hotels the last quarter of '07 and the first quarter of '08. If we went any further than that, I think I would be disappointed -- give or take.

As far as the tax rate is concerned, David, it should be primarily reflected the difference in the tax rates between Macao and Las Vegas. We essentially pay no taxes in Macao. And on our income because 100% of our income comes from gaming activities, and we're benefiting from a hiatus on paying income taxes in Macao through the end of 2008.

Our tax rate in Las Vegas for our U.S. business has remained the same. So I don't recall any unusual items or tax credits that would have benefited that line item in the aggregate. As far as table holds, Brad, do you want to take that one? Do you want (multiple speakers)?

Sure, I will take it.

(multiple speakers) mix between more income out of third quarter lower out of here; it's higher up a little bit. I said I believe it so.

Yes, because the reduction in income tax in Macao isn't scheduled to take effect until January 1. They are reducing income tax from 15% to 12% in that market. But we still don't have anything material in terms of profitability out of other operations beyond gaming in Macao.

As far as the table hold goes, we came in at about 23.9%. So we were advantaged by the table hold as well as additional gaming drop up 12.5% as we discussed. We are seeing the typical margins that we see in the casino side. We're actually about the mid 25 in terms of table game margins in that department. So it's not the high-margin business that some of our other revenue centers are, particularly the rooms which you'll find in this quarter is that the table game revenues accounted for about 34% of the total revenue mix, whereas last year they represented about 25% of the revenue mix.

We are also seeing some additional costs related to property upkeep. We're very conscious of spending dollars to keep our room product strong, particularly in light of the new competition that has come online, so seeing some increases in our maintenance costs. We've also seen some increases in our utility costs, taxes and property taxes and insurance costs. No other extraordinary changes in terms of the expense line items. I think payroll is in good shape and good control.

Certainly, as we had a lot of the high-end play in here in the third quarter, we saw expenses in the table games department go up but again on what we consider a typical normal basis for the quarter -- what we are used to seeing. It was nothing usual.

Larry Klatzkin, Jefferies.

Sheldon, you will always be my beauty queen. Can you go over -- there's all these rumors of marketing wars in Vegas, and that Wynn and everybody are getting aggressive. And I am not seeing that. What are you guys actually seeing on that? And how is the fourth quarter looking as far as stuff like that?

Wynn's getting aggressive? What is that?

Lots of giveaways, lots of lower margins due to aggressive marketing.

Rob Goldstein is here; he can probably address that directly.

I don't see that happening our market in Las Vegas. Obviously, there is a lot of competition with the Wynn property opening up, and everyone is watching to see what does happen. But slot table business remains pretty strong overall in the town, I think. Summer has challenges when Steve (ph) opened up. But I don't see that aggressive marketing you're talking about in terms of promotional wars on the slot or table side.

Good, I'm glad to hear that.

Just one other thing I want to add -- we've always been kind of property disadvantaged here at the Venetian. The property has changed dramatically as it relates to the high end -- the new baccarat table, which we opened up a year ago. Of course, we finally have the suite product, where we redid 18 of our penthouse suites. We did the Chairman suites -- the five Chairman suites at Paiza Club, which has gotten an enormous positive response from our Asian clientele. And then we will be redoing our Presidential Suites this year as well.

So we go into the fight, let's say, with a much better product. And I think that has helped us significantly in terms of not seeing an increase necessarily in our cost structure --

We also think you (multiple speakers) --

-- in Macao. And Macao of course is the other big helper to us in terms of the cross marketing capabilities that we see there.

Larry, Bill referenced briefly in his opening remarks how Blue Man -- we really think we are going to see a lot of better businesses; you say late-night for us. We've never had that advantage in the (technical difficulty) to date. So we think TAO, Blue Man, Brad referenced the pool, which is now a very competitive product. I think those will help us enormously in segments we've not competed well in the past.

And then could you go over this new island off of Macao? How long is it to get from there to your Venetian Cotai? And how exactly are those going to work together? What do you see from that as far as what you could pull in as money and profits and business?

Well, those of you that are familiar with the Cotai Strip if you have physically been there before, there is a huge bridge. It's like an expressway style, an interstate-style bridge that connects directly from Hengqin Island to a very large immigration station there. That bridge was built in advance to then meet with the highway improvements coming from Guangdong. And eventually, the highway that then connects to the bridge that by 2010, 2011 will connect Zhuhai and Macao to Hong Kong.

So that was a large piece of infrastructure built a number of years in advance, and that just fortunately connects directly over to Hengqin Island. If there were no border intervention, it would take 5 minutes to drive from the Cotai Strip to that piece of property.

Less.

Again, those of you that are in Macao, that have been to Macao before, if you have ever stood in front of the Lisboa or stood in front of the new Wynn property there and if you look out toward the water to the I guess it would be the Southwest, you see that Hengqin Island piece of property right straight ahead of you. It is a quarry that was developed; it has got interesting-looking step type face to a piece of white colored rock there.

There is a natural marina right in front. It was call it -- when we first went there and we first saw it, we said if we can ever get our hands on that piece of property, it is the most obvious development piece of property facing a Landstar Macao. And so we started working on that piece of property almost immediately after the government gave us the permission to develop Cotai.

Because again, as I think we suggested in the release, we look at the totality of the value of Las Vegas, and the totality of that value certainly starts with the casinos, extends to the destination extensions to the casinos in terms of spas and rooms and shopping and dining but really manifests itself in the real estate value developed around it. So we were thinking -- if we are going to develop a Las Vegas strip, why not develop a Summerland also? At least put ourselves in a position to hold the land and either piece it off to developers or utilize it both as a support to the Cotai Strip in terms of amenities like golf and tennis and things of that nature to help the destination but also then have the ability to either piece off or develop ourselves or get involved in capturing the total value of what we're doing on the Cotai Strip.

So we were very fortunate in the quarter to actually sign the heads of agreement in San Francisco with the Mayor of Guangdong Province and probably the Governor of Guangdong Province and the Mayor of Zhuhai. It's been embraced now by the planning department. As we move through here in Mainland China, it is never over until it is over. You have to take it a step at a time and be patient. It is going to take a period of time to get us to the point to where we have it designed and developed in the way we want to be able to do it.

But again, it's a follow-on development to the opening of the Cotai Strip and the residual demand of that much new destination product going in place from the strip is going to drive demand for second homes, for vacation homes, for primary homes and for other things that Summerland has become here in Las Vegas. And we wanted to have the full value of what we do on the Cotai Strip.

I would say that we've talked to the Governor, Chief Executive about the possibility of subsequently building another bridge that will just service the residents of the Hengqin Island development with Macao for rapid, non-burdensome immigration and/or customs connection where they just put their thumb on a biometric immigration machine, so people could just go back and forth for dinner.

Of course, in our dreams and in our fantasies, we hope that one day we could move the fence out of Macao around that island (technical difficulty) also in our dreams and fantasies.

That would be great. One thing, you were talking about the mall in Macao. I'm hearing that rental rates in that part of the world are a lot higher than you saw in Vegas. Does that mean that the implied value in what you have there is more? What are you seeing as far as initial talks on that property?

You've got it, Larry. What do we see? (multiple speakers) We signed up -- we said we're going to put an option out on this. We signed up one group of shops at an average rate -- I mean high jewelry shops at an average rate of about $400 per feet.

How does that compare to (multiple speakers) what was being done in Vegas?

Pardon me?

How does that compare to what was being done in Vegas?

When we started was -- we were under $100 a foot on average.

It's a 30% premium, Larry, to market today in Vegas.

So if you were trying to put a value on the Vegas Mall, you could be talking somewhere in the 2 and $2 billion, maybe?

Say that again?

If you were putting a value on the Vegas Mall compared to how you would sold the -- I mean the Macao Mall compared to where you sold the Vegas malls, could you be saying the value could be above $2 billion dollars in Macao?

(multiple speakers) Lawyers are waving their arms at us here.

And then the last question, Chinese exchange rate has changed. What are you seeing as far as the benefits to you in the exchange rate, and what is the talk going forward?

Well, anytime that the currency revalue is relative to our dollar, the same Renminbi makes us more money. So we can't necessarily reach out and say these guys, who are MBs now are worth 2 or 3% more; therefore, we put 2 or 3% more in our pocket. But needless to say, they are dealing in the same Renminbi, and we are dealing with more dollars as a result. So it has to help us.

We do hear that other adjustments are coming along. Snow (ph), I think it was the U.S. guy that is involved in that has continued to indicate that he sees more and more changes coming along. So I think we will see -- we will see more and more value to us as it relates to U.S. dollars.

And then a housekeeping -- CapEx just going forward to the next quarter, next year as far as timing?

I'm sorry, Larry. Can you just repeat that?

This final thing of CapEx timing for fourth quarter and for next year as far as how we should put into our models?

We're not prepared to talk about CapEx guidance for 2006 yet. But for the balance, we will do that on our year-end call. But for the fourth quarter, total capital expenditures are -- in Las Vegas, we have approximately $140 million broken out mostly allocated to The Palazzo about $110 million -- in Macao, for the fourth quarter, a total of about $228 million, 178 million of that on Cotai -- the balance at the Sands.

Larry, this is Sheldon again. Let me clarify the issue about the malls in Macao. Rob said that we will be selling the rates -- we will be renting space at a minimum of 30% premium to Vegas.

Premium to Vegas and much more JOAs.

And we've got 1.5 million split be the JOA.

Our JOA in Vegas is less than half that, Larry, so you do the math.

And you sold the two malls in Vegas, hopefully get at least 1 billion, 2 billion, 3 for the two of them combined?

Hopefully, we are going to get much more than that.

I am saying minimum. Congratulations.

To make sure the numbers are right, Sheldon talked about 1.5 million square feet of mall space. There is approximately in square feet of mall space in the Venetian project and approximately 0.5 million of mall space in sites 5 and 6, which is Shangri-La and the Sheraton probably (multiple speakers).

John Woodbury (ph), Independence Capital.

Great quarter. Based on my model in the out years, I can get to 1.8 billion of EBITDA and pretty unleveraged after the low taxes and the mall sales. And to that point, I was wondering if there's sort of an endgame, where you maybe think about possibly selling a first cut. Because like a pool of mortgages -- there's some buyer out there that will pay a lot for a first cut. And I'm not sure what the timing is or which assets you want to sell, probably not sell any of the gaming.

But do you look at any other assets as potential sources of liquidity that then generate even better returns and possibly actually solve two problems I think longer-term, which is that you get very unleveraged very quickly. And that eventually, there is a very large concentration obviously of shares. And I think the one solution I would propose is that maybe you use some of that cash if there are assets you can sell to maybe do a tender for 1 out of 10 or 1 out of 20 shares just so that the market doesn't Chicken Little when and if insiders ever decide to monetize part of the value they have created.

It sounded like a speech.

Yes, it is more of a sermon than a question, I guess.

What the question is?

The question is, would you monetize the first cut in some of your assets? And do you have a long-term plan about what to do with an unleveraged balance sheet?

Just let me ask you a question, John --

I will just answer the one quick question. Leveraged or unleveraged, our objective is to grow and create equity value. That is our intense, unequivocal, irreversible objective. That is what we're doing, whether it is leveraged or unleveraged. The more unleveraged, the more resources we have to expand as aggressively as we want to.

I don't think we are that smart. We're just focused on making money and creating value.

I'm telling you like my daddy told me about helping out other people that were poorer than we were. And I suppose he probably never thought that I would ever be so wealthy that he never taught me about big time philanthropy. So I will say the same thing, we never thought we would be debt free a few years ago in the near future. So we really haven't given that as a thought. But now that it is hopefully becoming a reality, we will figure it out quickly.

I'm sure you will; thank you.

Robin Farley, UBS.

Yes, I had a couple questions. You talked about some of the increase in room nights you are seeing in '06. But I wonder if you could tie that a little more specifically to what we can expect or what you expect us to mean in terms of RevPAR. On the last quarter's call, you talked about an 11% increase in group room nights in the second half of this year; we didn't necessarily see that translate into RevPAR growth this quarter, which was pretty flat in Vegas.

So I wonder if you could be a little more specific in terms of what you think it's going to mean to your RevPAR outlook. And then I have a couple questions after that.

I'm going to let Brad respond to that, but I just want to offer a preface. And that is, when you are selling at $10 and you increase 50%, you increase by 5. But if you are selling at 100 and you increase by 5, you only get back 5%. Our percentages are built because we are the pacesetter and the market leader in establishing the profitability for a hotel. And as a matter of fact, last year in '04 -- haven't done the research -- but I think we were the biggest-earning hotel in the history of hotels.

So would hitting that peak in RevPAR, would that suggest that your ability to increase is plateauing then?

Not at all. As the rates go up around town, as Bill said, it gives us a lot more headroom to go up. Because the delta with the competitor trying to sell for substantially less than what we are gives us a little downward pressure on rates; although, we don't experience that as fast. The less downward pressure there is, the more room we can grow.

When everybody else says yes, hotels can be a major contributor to the bottomline. And it seems that Las Vegas is now recognizing that. We are the pacesetter, and we will set the pace for increased room rates. We've done it for 6 years since we are open, and we will continue to do it.

So in terms of the third-quarter performance, we have only seen one of your major competitors in Las Vegas comment based on an 8 to 9% RevPAR increases. I realize of course that's off a different base than your base, but --

That is the significant issue. They are starting from a much smaller base than we are.

But in terms of you're saying that your ability to grow is when the market grows because you're at the top of the market. Since your RevPAR was relatively flat in Q3, does that mean you would not expect to see others in Las Vegas being able to have grown their RevPAR in the third quarter? That's what your view of what the market did in Q3?

That is a little confusing to me. But Brad, can you understand (multiple speakers)?

I am not sure. I can only focus on us. Our third quarter is always our challenging quarter in terms of -- I always say the Venetian was not built for the third quarter because of our model that is very successful. If you look at July and August for example, our RevPAR that was actually down on a year-to-year basis, where at September, we get more to our normalized type of business model. We did 209 last year RevPAR in September. This year, we did 221 in terms of RevPAR.

I think one of the keys for us, and we've learned that a little bit in the third quarter as well is the way -- obviously our RevPAR has to be grown primarily by rate because we're at such a high occupancy here. But going in with a strong group base allows us to have more of our way with the market. It's when you go in with a lesser base -- and we're competing in a market that traditionally we are not set up to be in as strong.

So the third quarter is kind of always the anomaly for us. We don't see as much group booking business during particularly July and August. And we have to go into a market that we are not typically as visible in both in terms of advertising, distribution or whatever. But when we get back into our modes like the fall periods and in especially in the first quarter, as long as we go in with a strong group base, which I think is what we are going to see into next year as we have articulated, I think we are going to continue to improve that number.

Although, as Sheldon said, when you start from a lower base, it is easier to drive higher growth rates of your RevPAR. We are certainly one of the leaders both in terms of our occupancy and rate and have been for years.

In other property I have noticed around town have actually started to slip a little bit there. We've actually seen ourselves maintain or grow in the RevPAR.

So is there a range for RevPAR growth in Q4 or '06 that would be either disappointing to you or that would be something you're expecting? Can you give us a sense of--?

Well, we haven't done that forecasting yet, Robin. I think that as Rob pointed out and we said that on many times, we're focused on one of the right ways to drive RevPAR besides group business is investing in the asset. One of the weaknesses in this product, particularly against the FIT market was the pool. We were a bit disadvantaged our pool didn't get completed until August of this year; that hurt us a little bit.

But we go into next year with a strong pool product. We go in with a much stronger entertainment product, which also makes the property more valuable. We go in with more restaurants, more ups entertainment. For example, we look at pre-booked groups for next year's third quarter, we are up 87% from where we were a year ago on our booking pace.

So I think for example, next third quarter, I would hope we'd see a stronger RevPAR because we've adjusted our sales effort to take -- to make sure we protect ourselves and don't find ourselves perhaps -- where this was recorded with not enough group room nights on the books.

And then in terms of margins in Las Vegas, you have a slight margin decline. I know you talked about table revenue being a greater percent of the revenue mix and that being lower margin than the room revenues. But if we -- it looks like even if we adjusted for lucks to be the same or table holds to be the same as it was in last year's quarter that we would -- or say given that luck was better in this quarter, it seems like there would still be a decline in margins even if you adjusted for that table mix.

Well again, margins -- if we look at our primary revenue centers that the margin in the room department remained constant at 68% I believe it was. And again, 68% is not what we typically run year around. But again, this is the third quarter, so our revenues and our average rates are lower. So that was the area.

Basically, most of our departments operated at the same level efficiencies. They said we had a few G&A costs related to reinvesting and the maintenance of the property. And I think like anybody, we've seen some energy spikes and we saw some non-operating spikes affect our overall margins. But again, most of the departments operated at relatively the same efficiency. The table business was a higher mix of the business; that caused some of that effect and in some costs outside of what I'll consider typical operating costs.

And slot hold was down as well; that affected us somewhat in terms of our slot win.

Last thing is just I guess housekeeping related to some of the items you're adding in to adjust the earnings. I think this is the first time you have talked about a litigation settlement being added in there. I don't know if you can put any color on that.

And then, when you look at your development costs, which you also add back to adjusted earnings, it looks it is ramping up. It clearly is a recurring expense; it's a long-term expense for a company like yours with a lot of projects in development. I guess I'd love to hear some color on why you don't think it should be included in earnings; why you add it back to earnings?

On the litigation front, we settled a portion of the construction litigation matter, and we booked an interest charge related to that settlement. And that is what's reflected in the earnings release.

As far as development expense, Robin, we understand your point. And we know that from a recurring expense basis that we, as Sheldon mentioned, we are a development company. We are out to build our big business and grow our equity value as quickly as possible, but it is different every year. It's different projects; it is different components. We do break it out for you specifically so that you can adjust your earnings the way you want to see it in your models. But that's not going to sway us from presenting it the way we do.

I just think it is confusing when the number presented on First Call may be different than what people are looking for in the press release.

We understand. But the way we want to present it, we don't lump pre-opening and predevelopment and corporate expense together the way we did when we first came out of the blocks. So we now break it up into three separate items, and it is $0.01 a share.

Steven Kent, Goldman Sachs.

I just wanted to clarify -- I think there are two main drivers to increase confidence in your ability to boost room rate next year and in the fourth -- really next year. One is that you've increased your booking pace on the convention and conference business and also some product initiatives, mainly some restaurants and some entertainments. Maybe just to clarify that because I think it's a pretty important point -- could you just give us a little bit of the deltas between the group and conference bookings versus the transient customer, who's coming in at the last minute, and your ability to really raise rate? Because that seems to be the upside to maybe numbers next year -- is how hard you can push that transient customer.

What we typically find here Steve, is that again the stronger base we go into, the more way we can have with the remaining rates. We have a bit of an interesting business here. All of our tradeshow business, we book the show management blocks and the blocks as group. But many of our -- let's say our people who attend tradeshows actually come under the FIT business. And there's examples where we book, for example, the jewelry show in June, which is typically a softer month for the marketplace -- we are able to book a small base against the jewelry show block. And then with the demand there, I think some of you have tried to get out here, and our rates are 499, 599, 699 --

899.

899. So what we are always trying to do is get ourselves enough of a group block at hopefully a very solid rate that we can yield up. We have a very strong yield management function here, a department with all the appropriate systems. And we change our rates everyday dozens and dozens of times for different dates.

So the ability is really to make sure that the product is attractive enough. The group room product, the meeting space that we are adding on not only is more space, but it's higher quality space than the base Venetian had. And that makes this product much more attractive. And the other thing I don't want to forget about in terms of the group business is group business is not defined as just the rate you get from the room. Group business in many cases is associated with banquet revenues. And the revenue of typically food and beverage margins in the overall market are not high. But we run a 55, 60% margin in our banquet business -- almost what we do in rooms.

And some of these mega groups that we have here, we run 70% plus margins for some of these big groups comparable to the rooms. So when we make decisions in our sales committees about taking piece of the business, it's not solely on rate. It has to do with patterns; it has to do what other kind of demand we can create around it. And importantly, we also look at other revenue drivers, particularly the catering and banquet business which is a very high-margin business for us. So all of those things have to be combined.

We go into next year with adding, as Sheldon and Bill said, 450,000 square feet of very high-quality meeting space. We go into next year with a whole new pool. We go in with new restaurants. We go with new entertainment venues. It's exciting to walk around this property and see how many dramatic things are going to change. We are going to come out with some other announcements in the very near future about another showroom that we're going to start construction on this month actually. Because of all this meeting space we are building, we are able to take the Palazzo Ballroom -- this is right across the Blue Man Theater -- and we will be building an 800 seat theater. We will be announcing an act that we booked. So we will be up to three showrooms by late next spring.

And again, these are voids that this property has had. We have told you from the beginning we want to attack our product weaknesses. The product weaknesses here in Las Vegas center around the pool and the FIT, the infrastructure to support the high-end market as we took advantage of the Macao opportunity and then meeting space and then of course nighttime entertainment has been a -- we've had an imbalance of trade at our taxi line.

It is nice to see -- it took me about 10 minutes to get out of the porte-cochere last night. I was actually happy about that. So a big difference from in the past, where we have seen the taxi lines there. Now, we see the taxes coming in.

I would point out another anomaly this summer that's kind of interesting. Three shows that we had in our Exhibition Center changed fairly dramatically in that they outgrew our space. The World's Shoe Show had to split between our space and Mandalay. Now, what that means is that when it splits, you don't have the same kind of base demand; you have got a shared demand. So you don't have as much leverage against the room rate.

The Magic Show also moved to the Exhibition Center at the Las Vegas Convention Center; we replaced that. But again, when you have a split, you don't have the same kind of strength. So we are dressing those issues.

There's a third show that also outgrew our space. We are addressing those issues by our preplanning of expanding our Exhibition Center also in the future.

But the realities are as we run into next summertime, the replacement and the changes there as I said because of the increase in room nights have been addressed. But it's kind of an embarrassment of demand wealth I guess you would say as shows outgrow space and then as we then replace them with other shows and as we expand our space.

Talk about expansion of exhibition facilities. We are going to build on the land we acquired adjacent to almost at the corner of Sands and Cobalt directly back of the Sands Expo approximately 900,000 square feet and 70 some odd, maybe 100 meeting rooms.

Rooms have become a popular subject around Las Vegas to talk about. But I just want to remind you that we changed Las Vegas, and we set the pace for other people to catch us and we will continue to do that. We teach the other guys in Vegas our Maximum Vision Room Income 101. But we are the professors in that, and they are just the students.

Harry Curtis, JP Morgan.

Can you follow up on the hold percentage issue? Because to the extent that it looked like you were hurt in Las Vegas, it looks like you were also to some degree hurt by a slightly low hold in Macao as well. Is there any quantification you can give us around that?

Well if you looked at -- we say our normalized hold on the Rolling Chip program is somewhere between 2.5 and 2.8%. The Rolling Chip was about 2.4%. So at the low end of the range, Harry, that probably cost us about $3.2 million of revenue at the 2.8 range, which by the way, I've seen in the past is that Macao as a market, it has held about 2.8% the last several years in the Rolling Chip volume. Obviously, 0.4% on $3.2 billion I think is about $12.8 million of revenue at the higher end.

On the mass business, we had a hold percentage of about 17.1 on that. And again, that's right within our range. When you add the what I call the "VIP non-rolling," which gets melled (ph) in there, I think we come down to about 16.7, 16.6%. Again, we would consider that at the lower part of the range. I think we said our range there is about 16.5 to 17.5%.

So certainly, it affected us. Whether you would say it affected us -- it probably affected us anywhere the two holds between 5 and $15 million in revenue there.

My second question is coming back to Vegas, Brad, you mentioned the rooms booked for the first quarter, 46% of your available room nights. Can you give us any color on pricing power year over year on those rooms booked -- either that or the quality of the group coming in? Do you think that the group has a higher value per customer?

We are forecasting against the group segment that we have on the books on a year-over-year basis to be up in terms of the average rate. We're seeing a stronger rate at least in our -- again against our booking pace year over year on the group business in the first quarter as well as more group room nights. So I think that's the good news.

I don't have, Harry, in front of me the food and beverage revenues that are associated with that. But again, I have to underscore that when we make decisions, I remember we had a lot of explaining to do when we went on the Roadshow in 2002 because we took a piece of Bristol-Myers business at a low rate. But it had like a $7 million food and beverage program, so people were focused on rate. But by the time you added the 7 million back at a 70% margin, it made a huge -- it was the right decision to make.

So in the businesses we are in, you have to look at the sum of all the components. And we'll see that as we go through the fourth quarter for example where the food and beverage -- our revenues will be up on a year-to-year basis the quarter we are currently in. So we will look at where we end up in the rooms' revenue side. But we are forecasting a nice pop in catering revenue in this quarter.

(multiple speakers) And then the last question that I had going back to Macao, I guess in December, Fisherman's Wharf opens and wondering what your expectations are for the impact of Fisherman's Wharf on the mass market? Shouldn't we expect some help in your mass market numbers once that opens?

To the extent that it drives more people curiosity-wise to Macao and to the extent that those people are by definition Chinese, we would expect that that kind of additional interest will always inure to your benefit. We don't expect a big pop; it's certainly not a Disneyland pop. But anything else in Macao that makes it an interesting place to come to and that Chinese folks are interested in coming to helps our mass market plot.

Was there a Disneyland pop?

I really don't know. We're so new to the marketplace. As we look year on year, I mean we did have growth in our mass business. We certainly had a great deal of growth in our Rolling Chip program. Don't think Disney equates to Rolling Chip. So if there is any pop, it would have been mass pop. But I don't think that we really had a great deal of change because of Disney.

Harry, on the premium play, the good news was that we had such a dramatically significant increase in gross business -- the amount of -- the units of dollars that we walked away with was a record-setting quarter; that's regardless of the percentage.

Ladies and gentlemen, at this time, I would like to turn the call back over to Mr. William Weidner for the closing remarks.

Well, thank you very much for listening in on our conference call and participating in our conference call today. We appreciate the opportunity of laying out for you our strategy and our direction. We certainly appreciate the opportunity of being able to respond to your questions in terms of how the business is developing in the future and how we did in the third quarter. I will look forward to many more of these discussions, and we appreciate your attention and your attendance today. And with that, we will finish our third-quarter conference call. Thank you very much.

Thank you for your participation in today's conference. This concludes your presentation. You may now disconnect. Everyone, have a wonderful day.