拉斯維加斯金沙集團 (LVS) 2006 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter 2006 Las Vegas Sands Corporation earnings conference call.

My name is James, and I will be your operator for today. [Operator Instructions] I would now like to turn the call over to Mr. Bill Weidner, President and Chief Operating Officer.

Please proceed.

Thank you, James.

Good afternoon, everyone, and thank you all for joining us here today.

With me here in Las Vegas are Mr. Sheldon Adelson, our Chairman, Brad Stone, Executive Vice President, Rob Goldstein, the President of The Venetian here in Las Vegas, Scott Henry, our Senior Vice President, Bob Rozek, our Chief Financial Officer, and Dan Briggs, our VP of Investor Relations.

Before we begin today, I do need to remind you that today's conference call contains forward-looking statements that we are making under the safe harbor provisions 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 these forward-looking statements.

Please see today's press release under the caption "Forward-Looking Statements" for the discussion of risks that may affect our results.

In addition, we may discuss adjusted EBIDTA, adjusted net income, adjusted EPS, and adjusted [property] EBIDTAR, which are non-GAAP measures.

Definition and reconciliation of these measures to the most directly comparable GAAP financial measure is included in the press release which is posted on our website.

Please note that this presentation is being recorded.

By now, you should have all received our press release detailing our financial results for the quarter.

The results in the release confirm that we continue to execute our operating and development strategies both in Asia and in Las Vegas.

In Macao, The Sands delivered another record quarter, with our visitation and operating metrics continuing to reflect incremental growth, even as extensive additional capacity was added to the marketplace.

In Las Vegas, The Venetian delivered a strong performance with both revenue and EBIDTAR increasing compared to the quarter one year ago.

Before we address our quarterly results and move on to your questions, I want to spend a few more moments on our perspective of the most important takeaways from the evolving marketplace in Macao.

First, a supply driven market scenario is clearly in evidence.

Gaming capacity is now being added at significant rates, and the market continues to expand in response to those increases in capacity, with the mass market in particular continuing to expand at healthy double digit rates.

Second, the best products in the marketplace, those that effectively address the market opportunity, are outperforming inferior product.

The results of The Sands Macao to date clearly support that view.

In a period when substantial amounts of new product have been added to the marketplace, our revenues and EBIDTAR at The Sands have continued to expand, while our market share has remained steady for the tables games at over 20% and continued to be very strong for slot machines, where we currently capture 30% of the market.

Our extensive Cotai development plans are based on these two fundamental concepts -- that the market will expand as quality product as introduced and that the highest quality products in the marketplace will not only win market share from the inferior product, but will also expand the market to a new set of customers -- a set of customers that either don't visit Macao at all today or visit Macao only infrequently.

While The Sands will remain a formidable property on the peninsula, our principal focus going forward will increasingly turn towards our developments on Cotai.

We believe that the elasticity of demand reflected in today's evolving Macao marketplace will receive a significant boost when the market's first truly integrated destination resort, The Venetian Macao, opens its doors for business on the Cotai Strip in less than nine [inaudible, technical difficulty].

We remain unwavering in our fundamental strategy.

Build the heart of the Las Vegas strip with multi-branded destination resorts, all connected by air-conditioned walkover bridges, on the doorstep of China.

We're now under construction -- are undertaking pre-construction activities at all seven sites on our Cotai Strip, creating Asia's premier convention, vacation, and leisure destination.

Turning to our operating highlights for the quarter, third quarter adjusted property EBIDTAR came in at $202.6 million.

That's a nearly 29% increase over the third quarter of 2005.

Third quarter adjusted EBIDTAR for The Sands Macao came in at an all time record of $127.4 million.

That's an increase of over 41% versus third quarter of 2005.

Third quarter occupancy at The Venetian Las Vegas was a third quarter record of 98.4%, and third quarter RevPAR was also a third quarter record of $217 per room, up 11.3%.

ADR was actually $221.

We advanced on a number of targeted capital improvements at our operations both in Las Vegas and Macao, strengthening our long-term strategic positioning.

We made further progress on the lease-up of our retail malls on Cotai, and advanced negotiations with additional trade show meeting organizers to host additional conventions, exhibitions, and corporate meeting events at The Venetian Macao.

We executed our development agreement with the Singapore Tourism Board for the Marina Bay Sands at Singapore, and completed a $1.4 billion credit facility to fund our land concession payment and development activities.

And finally, we continued our ongoing efforts to secure additional development opportunities to supplement our growth pipeline around the globe.

So those are the highlights.

Now let's turn to our detailed quarterly results.

In Las Vegas, both revenue and EBIDTAR were stronger, as our convention-based strategy drove revenue increases in our hotel, convention, and food and beverage businesses.

Casino revenues were actually down compared to one year ago, reflecting a decrease in high end play versus the year ago period.

Table hold of 23.4% came in above our expected range of 20% to 22%, but below last year's third quarter hold of 23.9%.

Las Vegas EBIDTAR came in at just over $75 million, up 12.1% compared to the same quarter last year.

These results reflect the strength of our convention-based strategy, driving double digit increases of EBIDTAR despite an anomalous decrease in high end play.

Our expanded eating facilities provide with us greater capacity to book group business, which contributed to a record third quarter occupancy and RevPAR and a strong food and beverage performance.

If group catering revenues are added to room revenues and divided by the available rooms, the rooms and catering RevPAR grew from $218 in the third quarter of 2005 to another third quarter record of $266 in the third quarter of 2006, an increase of over 22%.

Our convention-based business model is performing well, and we look forward to expanding that strategy and harnessing the full power of our Las Vegas master plan with the opening of The Palazzo in the third quarter of 2007.

At The Venetian, we made progress improving the yield from our expanded convention space and entertainment offerings.

As these assets continue to ramp, we expect to see additional progress, but do not expect to realize the full impact of these enhancements until the opening of The Palazzo in 2007.

Other components of our Las Vegas capital improvement strategy include a third theatre, a 700 seater that opened just last week.

And in terms of room products, we had started the renovation program of all of our suite rooms, all of our all-suite rooms, in The Venetian Tower.

This renovation will update, improve, and contemporize our Venetian rooms while minimizing disruption to our business, and is scheduled to be completed by the time The Palazzo opens next year.

Construction of The Palazzo next door remains on track for a fall 2007 opening.

Our retail leasing activity in The Palazzo Mall, which will be anchored by Barney's New York, continued to progress, with approximately 80% of the space now under lease or in agreement on commercial terms.

We are anticipating the leasing of the remainder of the space to be completed by spring 2007.

Turning now to our performance and activities in Asia.

The Sands Macao turned in another record quarter, generating an all-time adjusted EBIDTAR of $127.4 million, up over 41% from the quarter one year ago.

We remain pleased with our performance across the board in our casino business, the mass market, the VIP market, and the slots business.

As I mentioned at the beginning of my comments, despite a more than doubling of capacity in the marketplace, we've been able to maintain our share of table game market in Macao.

In addition, our podium expansion, which was opened in late August, will now allow us to specifically target the market to an additional segment of the mass market, or the mass table market, with the $100 Hong Kong, which is approximately $12.50 average bet, baccarat player being the primary target of these new tables.

The expansion will also provide incremental capacity on weekends, holidays, and at any other period of strong, high mass market demand.

During the last quarter, our mass table drop was $11.3 million per day in the quarter.

That's up modestly from $11.1 million per day in the third quarter of 2005.

Slot handle grew 39%, reaching $265 million, producing a win per unit per day of $245 across -- excuse me -- across the 934 slot units on board versus $218 across 802 units of slots in the quarter one year ago.

That's a 12.4% increase in slot machine win per unit, despite a 16.5% increase in capacity at The Sands, and an increase of over 63% in the Macao market as a whole, a further evidence of that supply-driven demand I talked about earlier.

On the VIP market side, rolling volume came in at $3.5 billion in quarter three compared with $3.2 billion in third quarter of 2005.

We remain extremely pleased with our VIP business, which experienced an unusually high hold percentage during the quarter.

This unusually high hold percentage actually served to depress reported rolling chip volume, and we'll talk more about this relationship between hold percentage and rolling chip volume later on in the call.

We continue to bring on board additional VIP players into our high end network, and will continue to focus our Paiza marketing activities in Asia to directly support Macao and indirectly support our activities here in Las Vegas.

Our strategy for growth and expansion in Macao remains clear.

At The Sands Macao, our podium expansion is now complete.

The final phase of the expansion added over 250 mass tables and nearly 300 slot machines to our capacity.

As this new capacity begins to ramp, we'll focus on serving the lower end of the mass market, the $100 Hong Kong baccarat player, with more table capacity and expanded Asian fast food offerings.

We'll also begin direct advertising and other marketing programs targeting this profitable and rapidly expanding segment of the marketplace.

On the VIP side at The Sands, we continue to recruit new players with our Paiza Club offerings.

To better serve this business segment and to match complementary room product to increase VIP capacity, we're adding an additional 240 rooms -- those rooms in the Paiza Suite category -- to our current inventory of approximately 50 suites at The Sands.

Construction has already commenced on the 39-floor Tower, which is expected to cost approximately $100 million and expected to be completed in late summer of 2007.

On Cotai, construction of The Venetian Macao, which will anchor the Cotai Strip, remains on schedule for a summer 2007 opening.

The building is now topped off, and we expect construction to be substantially completed by April 1st.

On the remainder of the Cotai Strip, we're continuing to make significant progress.

As we have previously announced, we've entered into non-binding letters of intent with Four Seasons, Hilton, Conrad, Starwood [Sheraton] and St. Regis Brands, the Fairmont Holdings, Raffles Internationals Fairmont, and Raffles Brand, and we expect to sign definitive agreements shortly.

We've already signed definitive agreements with Shangri-la, covering their Shangri-la and Traders brands.

Given the tremendous interest in booking demand we are seeing in the convention and corporate meeting side of our business, as well as from the Chinese and other Asian tour operators, we've decided to move certain portions of our Cotai development forward.

Specifically, two 1,500 room hotel towers that were originally envisioned to be added in phase two of the Strip, have now been planned into phase one of our development.

One of the towers will be on site five.

The other tower will be on site six.

This modification will enable us to provide the additional hotel product required to stage larger exhibition and trade shows in our convention facilities and to meet the demand that we see developing from tour operators.

We've also significantly expanded our meeting facilities that we plan to build on sites five, six, seven, eight, and on three, on the Cotai Strip, to tailor these developments to the potential that we see in the marketplace.

Our pipeline of prospects for larger events, events that require significant blocks of hotel inventory for 2007 and beyond, continues to grow.

We are now entering into the booking window for 2007 corporate meetings -- meetings that can be accommodated with a portion of the 3,000 hotel rooms which will be made available upon the opening of The Venetian.

We expect to announce some significant additional signings on both the corporate event and trade show pieces of the business very shortly.

On the retail side, we continue to make steady progress on the leasing of the malls on the Cotai Strip.

At the date of our last conference call, we announced that we had reached commercial terms with more than 315 premium retailers for 699,000 square feet of retail space.

That represented nearly 60% of the approximately 1.2 million square feet of available space in our Grand Canal shops and the adjoining mall at The Four Seasons in Macao.

Today, three months later, we have reached commercial agreement with over 400 retailers, for more than 867,000 square feet of space, representing over 72% of the available space in the Grand Canal shops and the adjacent mall on The Four Seasons.

We're moving ahead with definitive leasing documents now, and have executed documentation with a number of them.

We've also begun the leasing process for now for sites five and six, given that we are now effectively sold out on the main level of our Grand Canal shops in The Venetian.

Sites seven and eight and three will follow thereafter.

These additional Cotai developments will add another 2 million square feet of retail space.

Turning to entertainment offerings on the Cotai Strip, we've advanced our plans with Cirque du Soleil to create a permanent home, the first in Asia, at our 1,800 seat Cirque du Soleil theatre at The Venetian Macao on the Cotai Strip, and we continue to pursue other world-class entertainment talent to appeal specifically to our mainland Chinese, Hong Kong, and pan-Asian customer base in Macao.

We have made dramatic process in our Hengpin Island development plans.

The Quangdong and Zhuhai governments have now authorized me to make the following statement, and I quote -- "All major departments of the Quangdong government have had a meeting regarding the approval of the master plan of Hengpin Economic Cooperation zone of the Pan Pearl River Delta.

The master plan is expected to be approved and executed by Quangdong government within one month, according to PRC regulations.

The conclusion of the meeting include that The Venetian resort property will become the first resort project to be invested in Hengpin Island by the People's Republic of China.

The project includes MICE, tourism, holiday resort, and time share units.

The total proposed project area by The Venetian is about 8 square kilometers.

The approval process has reached the final stage, and expected to be finalized by the end of this year."

And I close quote there.

Several news outlets in Macao and the mainland have confirmed these sentiments.

Now that the approval process is in its final stages, it makes sense for us to reiterate our vision for what the Hengpin Island development plan does for our overall development plans in Macao and in the PRC.

When our Hengpin Island plans are combined with our developments on Cotai, we will clearly be building the largest integrated destination resort in Asia, which will cater to both business and leisure travelers and will encompass world-class exhibition and conference facilities, live entertainment, shopping, fine dining, yachting, golf, tennis, water sports, gaming, and other activities.

And most importantly, give us a mainland China address to promote to the 1.3 billion annual visitor Chinese domestic travel market and over 60 million delegate, meeting, and convention market.

This combined mega-destination will target business and leisure travelers, not only from the Pan Pearl River Delta in China, but also from Japan and South Korea, North Asia -- in North Asia, as well as South and Southeast Asia.

To further these efforts, we're developing a strategic business partnership with key travel agencies and travel distribution channels in each country to create, to promote, and distribute tourism programs and packages to our fully integrated resort.

The packages and programs are designed to appeal to leisure travelers, honeymooners, family vacationers, gourmet diners, and those who enjoy shopping, live entertainment, and a relaxing spa experience.

To advance these efforts, I traveled to Beijing last week and met with the leaders of the various governmental travel agencies and the PRC, including China National Tourism Administration, China International Travel Services, China Travel Service, China Youth Travel Services, and other major travel entities in mainland China, to introduce The Venetian Macao, the Cotai Strip, and Hengpin Island developments, to discuss the development, cooperation, and promotion opportunities with them.

Each of these governmental organizations, which are among the largest travel services in China, expressed interest in establishing strategic business alliances with us to promote The Venetian Macao, the Cotai Strip, and Hengpin Island as an integrated destination through their national -- or the nationwide distribution networks.

Additionally, last Friday, we organized the China Tourism Forum at the Great Hall of the People in Beijing to promote our new destination.

The guests who attended included senior government officials from the Central Government of the People's Republic of China, the Beijing municipal government, leaders of the China National Tourism Administration, the Beijing Municipal Tourism Bureau, and senior executives from China Exhibition's Group and the China Council for the Promotion of International Trade.

In addition, representatives from national and regional broadcast, print, and online media attended the forum.

The response and support we received from the forum delegates was nothing short of tremendous.

While it is clear that we've made a breakthrough in furthering our Hengpin Island development plan, much remains to be finalized as we move forward.

And the Central Government control policy approvals, like border crossing, offshore currency trading, preferential taxations and such have yet to be finalized.

Our Hengpin and related Shang Chuan Island development plans continue to be subject to receipt of the last of the necessary government approvals.

But before leaving our discussion of Hengpin Island and the Cotai Strip, I wanted to summarize where we are and we expect to be from an investment and a staging perspective.

For the Cotai Strip, given our expanded gaming and meeting facilities in each of the sites five, six, seven, eight, and three, as well as the additional hotel towers, which will now be built on each of the sites, we expect to spend between $9 billion and $11 billion, [inaudible, technical difficulty] of land premiums and the expanded hotel room, meeting, and gaming facilities.

The Venetian Macao [inaudible, technical difficulty] Four Seasons, which has not changed significantly in scope, will represent approximately $3.5 billion of that $9 billion to $11 billion total.

With respect to staging, we expect The Venetian to be open in the summer of 2007; the Four Seasons to be completed about six months thereafter.

We now expect sites five and six to open in mid-2008, and sites seven, eight, and three to open in the latter half of 2009.

For Hengpin Island, we expect to invest approximately $400 million in the first 18 months of our initial phase, although we could potentially invest as much as $2 billion in the next five years and as much as $10 billion or more over the next decade.

As we mentioned before, we expect that much of our Hengpin Island investment will be financed by the sale of vacation suite property as we move along in its development.

Turning to the development of the Marina Bay Sands in Singapore now, during the third quarter, we signed our development agreement with the Singapore Tourism Board and completed the land-related payments called for under the agreement.

Our preliminary leasing and pre-construction site preparation activities continue to progress.

We expect to begin the work on foundation systems early next year.

In terms of other Asian development opportunities, we're continuing to pursue many promising opportunities.

Japan in particular could potentially represent a tremendous opportunity for us.

We continue to interface with the authorities there as they consider proposed legislation that could over time enable the economic benefits of convention driven integrated resorts to be brought to Japan.

We are pleased to report today that we will host a tour for 25 members of the Japanese Diet over the next few weeks to tour The Sands Macao, our Venetian Macao integrated resort construction, and take them through our development plans for our combined Macao-Hengpin destination.

We believe our extensive developments in Macao provide a unique showcase for how to maximize economic development through the adoption of casino gaming and position us as the world's foremost developer of integrated resorts, a distinct advantage as we seek to fill our development pipeline for the future.

On the domestic front, we continue to advance our proposed development of a 126-acre Bethlehem Steel Works site in downtown Bethlehem, Pennsylvania.

We are now scheduled to present to the Pennsylvania regulators on December 5th.

We remain enthused about the potential of this site, just a 90-minute drive from New York City, and less than an hour's drive from the affluent northern New Jersey suburbs of New York -- a Foxwood-style of development opportunity.

So we expect the decision on this site by the end of the year.

Before we go to Q&A, let me conclude by saying that while we clearly have a huge amount in front of us, our number one focus remains on execution.

Execution in operations, execution in development, and in the identification and successful nurturing of future opportunities.

We remain confident that successful execution of our plans will produce tremendous long-term results and industry-leading returns.

And while the trajectory of our growth will certainly not be without an interruption or two, steady, deliberate execution of our plans in Macao, in the PRC, in Las Vegas, in Singapore, and in future jurisdictions, remains our primary focus.

That's what brought us to where we are today, and that's what will take us to higher levels of performance in the future.

And with that formal introduction, I'd now like to turn the presentation over to you for Q&A.

And we'll open the mike now, James.

[Operator Instructions] Your first question comes from the line of Larry Klatzkin with Jefferies and Co. Please proceed.

A couple of questions, Bill.

One question would be can you just go over the effect of the rolling chip and how much that might have benefited you to the bottom line, and how that works?

Brad has some of the detail on that, Larry.

Larry, we did a calculation and came up with about $17 million positive effect to our EBIDTA line in terms of the hold percentage.

As we get further into this rolling chip program, we realize that there are distinct relationships between hold percentage and gaming -- rolling chip volume.

When the hold percentage goes down, we have perhaps an artificially high rolling chip volume.

The inverse of that is when the hold percentage goes up, we have, as Bill pointed out, a depressed rolling chip volume.

Let me take you through how we think about it.

We look at -- if you look at the third quarter, what we actually reported, we reported $148 million of win in the rolling chip program.

And that's an absolute.

We won that money.

The tax on that would have been about $57.8 million, so our after tax profitability would have been $90.5 million.

Since we dropped $3.5 billion of roll, the commission on that would have been about 1%, or roughly $35 million.

So the way we do our actual profitability for this prior to third quarter would have been $55.5 million of profitability on the rolling chip program.

Now the way we look to normalize it, we say that the win stays constant.

That's the actual money we won.

The tax again would be the same at 39%.

So we maintain the after tax effective $90.5 million.

What we do now is we look at a normalized hold in terms of the rolling chip program of about 2.85%.

The way we look at it is we take the win of $148 million, divide it by 2.85%, and we come up with an adjusted rolling volume that should have generated -- we normalize our hold.

We therefore, we believe, have to normalize our roll at $5.2 billion.

Now that $5.2 billion at 1% would have a $52 million commission associated with it.

So at that calculation, we'd net out about $38 million of profitability.

So the delta between the $55.5 and the $38.5 we came up with on our adjusted and normalized rolling chip program yielded us about a positive result, because of hold percentage, of about $17 million.

Thanks, Brad.

That was very comprehensive.

Thank you.

Second question is StarWorld opened up just -- are you seeing -- it's only been a little while.

What are you seeing?

The spending and how the market tenor is since they opened?

I just came back over the weekend.

Brad was there last week.

This is Bill, Larry.

And I just came back over this past weekend, and it was very strong.

Business pretty well all over was very strong.

StarWorld I thought was a little better than I expected it to be.

Generally, those guys, quite frankly, build some pretty lousy product.

That product's pretty good.

It's better than I expected.

Unfortunately, as usual, they bought a little piece of property.

Not a big enough piece to do a significant casino layout.

So as expected, the first level of gaming was reasonably busy, but then as you got upstairs to the next levels, it got less and less busy.

So they did a pretty good job I think in the basic physical facility.

The lobby was pretty nice.

Nicer than expected.

First layer of gaming was strong.

But then the upper levels were weak.

I'd expect that kind of thing to continue.

Okay.

You haven't -- and you haven't seen any weakness or anything out of your place since they opened?

We just -- it was very strong over this past weekend.

Now Monday was a holiday, too.

And one of the things we talk about is the fact that we built this expansion because the cost to staff table isn't all that high, and the fact that once you hit -- relative to the average bet over there.

But once you hit a busy period of time, you [inaudible] a lot of cash.

And we certainly were using that additional capacity this weekend because it was all that strong.

I walked through -- and also, [inaudible] was very busy at the -- as usually, in the first part of the casino.

And then you get back into the corners of it, and it's -- some of the -- you can't find all that well -- that well occupied, shall we say.

But generally, the market was strong.

Lots of people running around.

I didn't go to the second or tertiary places of the Casa Real or the Golden Dragon or some of those other places, but we expect them over time to wither away and be less populated as better product comes into the market.

Or as they close, as they should.

Last question.

As far as -- capacity, now, did you accelerate 1,500 rooms twice, or did you actually add an additional 3,000 rooms?

No.

We just accelerated -- our phase one, we were going to do 1,500 room hotels on each of the sites.

And then we were coming behind that with another 1,500 rooms.

What we decided to do on five, six, is accelerate that pace to build 3,000 rooms in each, five and six.

Okay.

So you're ending up with 6,000 rooms right away on your mid-'08 opening date?

Yes.

Well, you actually have 3,000 Venetian.

You'll have 400 and some odd of Four Seasons.

And then you have 6,000 on [inaudible, crosstalk].

Yes. [Inaudible] Larry, to be clear, there'll be a little bit of a lag time on the second two towers on five and six.

So while we project, as Bill said, roughly a September opening right now for sites five and six, the towers, the two additional 1,500 room towers, will probably lag behind.

I'm going to guess in a range right now about six months.

Okay.

Now what would be good is those towers will be fully completed when we open from a structural and exterior standpoint.

So we wouldn't expect any disruption or any visual disruption to the product.

All right.

Congratulations.

Any movement on site nine?

Site nine.

The last thing we know -- this is Sheldon, Larry.

The last thing we know, the last time I talked to the chief executive, he said site nine would be us.

We just can't [trust it] at this time.

But he said he made a commitment and he'll keep it.

Great.

All right.

Thanks, guys.

Great results.

Your next question comes from the line of Bill Lerner with Deutsche Bank.

Please proceed.

Thanks, guys.

I think Klatzkin should bring a well-armed body guard with him next time he goes to Macao.

A couple of questions.

Could you speak a little louder, Mr. Lerner?

Yes, sir.

Can you hear me now?

That's much better.

Thank you.

Okay.

So a couple of questions.

Outside of the GGP deal at The Palazzo, should we think about you monetizing anything else on that parcel?

And then I've got a follow-up.

Well, currently, we're working through approvals, and received our approval at the town board meeting and the planning commission for a condominium development on what we -- used to be the Rosewood Grill site.

Currently on top of the building that's going to house Barney's.

We would -- we're seeking final approval of that project on November 8th, between -- before the Clark County Commission.

Currently, the program calls for about 370 ultra-luxury [say] condominiums and units that would rise up to about 50 stories in height.

We certainly believe this is a premier piece of real estate.

Now we're talking about how to possibly brand that premier piece of real estate.

It provides an opportunity for us to utilize [air] rights that we have and maximize the value.

It also is obviously accretive to the visitation to the properties.

But I think it's our belief, and people we've talked to that are involved in this business believe that these units, with its location right on the Las Vegas strip, tied into The Venetian Palazzo complex, with our various amenities, such as Canyon Ranches, our restaurants, our shopping centers, etc., could yield a very high sale per square foot in terms of those condominium products.

So that's what we would look at as additional monetization of asset beyond the general growth fields that we currently have.

That's real helpful.

I appreciate that.

And then the follow-up is, and I don't mean to harp on this because obviously it's a lot more about -- than gaming these days.

But what happened at the high end this quarter at The Venetian?

Everything else looks phenomenal with respect to non-gaming.

But can you give a little bit of color there?

Yes.

Overall drop, obviously, was impacted on the premium side because you're actually up on the non-premium side by about $11 million, $12 million of drop.

The premium side was impacted by actually one extremely good customer from last quarter, in '05.

And that customer created huge amounts of table drop and huge amounts of table win.

And he wasn't here this quarter.

Okay.

Thanks, guys.

Thank you.

Your next question comes from the line of Celeste Brown with Morgan Stanley.

Please proceed.

Hey, guys.

Hi.

Can you talk a little bit about -- more about your plans on the Cotai Strip, first?

Could you give a little more detail as to the cost now for five and six and seven and eight?

And then are you still working with Far East on site three?

And then why the pushback on site seven and eight to 2009?

[Inaudible]?

Sorry. [Inaudible].

Right.

Let me first address the pushback on seven and nine -- seven and eight to '09.

We are going to get that thing done as quickly as humanly possible.

So we'll be as aggressive as we can be.

Right now, we just recently got approval, and we're on the site doing two things.

We're doing test borings as well as we are reclaiming the land again.

We controlled sites one, two, and three for the reclamation.

The government actually performed the reclamation on sites five through eight.

And while we're currently under construction of five and six, we've had to contend with less than stellar ground conditions, and we're handling that and moving forward.

But we also have an opportunity while we're developing the architectural plan to do a better job reclaiming sites seven and eight above and beyond what the government did so we have a better site to work with.

Once we get into the ground on seven and eight, the development time will be roughly two years to 28 months.

So I think what Bill is articulating that if we get into -- it would be my hope that we start piling work and start foundation work sometime in the first quarter on site seven and eight.

For the 28-month construction period, these buildings are now 13 million square feet.

To give a little reference to that, The Venetian Macao was 10.6 million square feet, and those of you who've seen that property would agree that 10.6 million square feet is pretty impressive. 13 million is even more impressive.

So the reality is we think a 28-month time schedule is appropriate.

You take that out until say the March time frame.

We find ourselves somewhere in mid-'09 in terms of opening those assets.

As far as costs of the development of these assets, we're looking at a range of about $3 billion in terms of cost to the development of those various assets.

We're running about -- in terms of construction costs, about $230 to $240 a square foot.

We feel that's very -- that's very positive in this -- in today's marketplace.

We do find the same thing in Macao with cost of materials being high, just like anywhere else in the world.

And it is a more heated construction and development market, with all the activity going on.

But as we've pointed out in the past, we have a huge advantage in being by far, without question, the most aggressive developer there.

And so we usually have first choice in the market of the contractors we want to not only provide cost effective building but also one that is well-built and well-designed.

So that's kind of where we are with those parcels.

Sorry.

So the $3 billion is $3 billion total for sites seven and eight, and then $3 billion total for sites five and six?

Yes.

It'd be separately -- it's in the $3 billion range.

Obviously --

[Inaudible].

In terms of all that, that does not include the land cost on that number.

Oh, so $6 billion for --

Obviously, the land cost is negotiated and calculated between us and the Macao government, so we're not jumping ahead necessarily until we finalize our plans, because the way that the calculation is done, and I'm sure as you're well aware, Celeste, is what space is what type of space.

And there's a premium calculation and then a determination of potential discounts, reclamation costs, credits, etcetera.

So essentially, $1.5 per site?

No. $3 billion --

Oh, for all four.

$3 billion for five and six, $3 billion or so for seven and eight.

Three, seven, and eight may be a little more expensive simply because of inflation.

Okay.

And then just finally, where do you guys stand with Far East at this point?

You're the Chairman of the company.

I don't think we said, but we're going to build 6,000 rooms on each of five and six and each on seven and eight.

I think we made that -- hopefully made it clear that that price, just to make it -- to follow up on that, that sites five and six includes 6,000 plus rooms, plus 1.2 million square feet of serviced apartment complex.

And the same thing occurs on sites seven and eight. 6,000 plus rooms plus 1.2 million of serviced apartment complex.

This is Sheldon.

Let me -- Celeste, let me clarify that.

We're building approximately 19,000 rooms, 3,000 each on five and six, seven, eight, and three.

And lot one with The Venetian.

That's six times three.

It's 18,000.

Now there may be an extra 100 or two on each lot, so combined with the 400 Four Seasons, it's approximately between 18,500 and 19,000.

That does not include the serviced apartments.

Okay.

And sorry.

Just -- sorry to be a pain.

But where do you stand in terms of your negotiations with Far East?

Are you able to comment on that today?

I don't have any updated comments.

The last thing we were doing was trying to finalize the agreement.

We're doing so based upon the moral obligation that we feel with them.

And we're trying to work out the details.

Frankly, I'm not quite up to date.

I'll make the call tonight.

I will say this.

If we have something to put out immediately, we'll put out a press release on it.

I will say this.

The business transaction does not preclude us from moving forward in terms of design, development, and we're going to continue on that process.

And again, that would be a project that we'd hope would probably start by next summer.

Getting the plans done, getting approvals, and then piling.

If we can do it sooner, we will.

But the transaction between ourselves and Far East, we are going to be the developers of the site.

We are going to be the overall designers of the site.

And because of that, we're going to move forward and do exactly that.

Okay.

Thank you.

Thank you, Celeste.

Your next question comes from the line of Robin Farley with UBS.

Please proceed.

Thanks.

A couple of questions.

First, can you talk about any interest or plans you might have in operating ferries?

Having LVS directly operate ferries from Cotai?

And if that's something you wanted to do, how quickly could that be up and running?

Would it be before The Venetian Macao opened?

We have always told from the beginning that the likelihood of our operating ferries might become mandatory.

From both a capacity standpoint and a competitive standpoint, we need to operate the ferries.

We put out an RFP, and we're now evaluating the returns for ten 420 or 430 passenger ferries.

We will either operate them ourselves and/or we will have a management company operate them for us.

It's one of the things that we've always believed, that additional transportation capacity is necessary.

And in that respect, I'm quite pleased to read almost -- at least once a week of another route -- airline route being established by some carrier somewhere to accommodate the demand that is arising and will arise from all over Asia.

Also, I think we're encouraged by the construction of the second ferry terminal that's right at the foot of the airport, right near the Cotai Strip.

So it almost doubles the amount of slips available for ferry service from [Tianjin], from the airport, from the Hong Kong airport, as well as Hong Kong itself.

So that alone then opens up another transportation opportunity.

Just to clarify though, if the ferries at this point I guess are not ordered yet, what would the timing be -- could they be up and running before Venetian -- The Venetian opens?

I think it'll be -- there might be some overlap.

We may get two or three by that time, but we won't get all ten by the summer.

We should have all ten by the end of the year.

Okay.

We haven't -- we're in the process of evaluating the responses to the RFP, and one of the things that's very pivotal is delivery time.

This is a relatively minor investment, but a very important cog in the wheel, to have additional capacity.

But just FYI, with 430 times four an hour, it is 1,720 capacity an hour times -- let's see.

Times 15 hours.

Let me see. 430 times 4 times -- 712. 16.

At least say 30,000 capacity a day.

Okay.

Great.

And then for Hengpin, I guess it had seemed like that you had already had Quangdong Province approval.

And it seemed like the only thing that was still outstanding was getting Beijing approval.

And so it sounds like a lot of progress was made.

I guess -- I thought Beijing was the only thing that was left to get.

I wonder if you could update us on the timing of that.

Let's put it this way.

The significance of the fact that they allowed me to quote them is a meaningful significance.

With the 17th Party Congress in March, does that -- do you still expect -- that seems to be holding other things up in terms of Beijing approvals.

Is that something that you think could delay your approval for Hengpin?

No.

You didn't hear me.

Quangdong would never allow me to make that statement.

Okay.

So we'll get --

Do you understand?

That we'll get the -- you'll get the approval from Beijing by -- before March, is what you're saying?

I can't say that.

I can [inaudible] say what I'm authorized to say.

Okay.

The authorization [inaudible] take place.

Okay.

He said -- Bill said [inaudible] that the final decision is likely to occur before the end of this year.

That's within the next 60 days.

Right.

So you'll have to accept that as much as we can say.

Okay.

There's one thing I'd like to add and clarify.

Now Bill read that we're going to invest $2 billion or $10 billion.

We expect to invest primarily in the infrastructure up front, which in Chinese terms will be significantly lower than what it would be even in Macao because of the cost of labor and construction in China.

Therefore, we expect to presell virtually every [villa] or apartments, unless we feel for some reason we don't want to -- we don't want to presell them.

We want to get them up, in some cases, like time share or fractionals or -- if we pursue that approach.

So we're not looking to spend -- we're looking to self-finance the project.

And we don't know yet.

It's still too far away to say what the infrastructure will cost.

But then we'll start selling.

It should self-finance just like most other condo developments.

Okay.

Great.

And then last question is actually just on Las Vegas.

And just to clarify, you mentioned the baccarat volume, a lot of that was driven by one player in last year's quarter.

Just what we've seen so far for the Las Vegas market -- we don't have the September figures yet, obviously, but July and August, the volumes were up very strongly overall in the market.

Maybe September ends up low enough that the quarter's not up that high.

But I guess I just wanted to get some color on when we do see what the overall market's done for the quarter, whether -- will you feel like there's been share loss or anything overall for the quarter outside of that one player?

[Inaudible] and I believe it's a volatile business, and the player may come quarter.

Next quarter -- you can't look at it quarter by quarter.

The problem with the high is historically [inaudible] anybody else is that this is a business where a player, two players, three players, can make a significant difference.

I think you have to look at our overall business and look at our overall volume.

And I think that anywhere in this town, a couple of customers come in and create tens of millions of dollars worth of potential win.

It can impact that month, that quarter.

If you were to look at month to month results, the primary impact of our business volume fall-off is in the month of July.

So when you look at August numbers coming out and you see increase there, we shared in that.

We were actually up in that period.

So in September, we were not quite up as much on a yearly basis.

Most of our effect of our loss of that drop occurred during the July period.

Okay.

Great.

Fair enough.

Thank you.

Your next question comes from the line of [Umrishi Parikh].

Please proceed.

How are you doing?

I've just got a couple of quick questions.

Palazzo, how much have you paid to date, and how much do you have left to go?

For the capital expenditure.

We'll get the book out here.

Why don't we go to the next question while we're looking that up?

We'll get you that.

The next question is also a cap-X question.

I just want to get an idea what the total cost was for the 450,000 square foot meeting space.

I'm sorry.

The meeting space in Palazzo?

The cost?

Yes.

The cost of it.

The cost is -- well, there were two components in that cost.

When we built the Venezia Resort expansion in 2003, or actually built the first level of it.

We built the steel superstructure.

I believe the cost -- we spent -- the additional space was roughly about $100 million for the remainder of that square footage.

It was partially built.

We built a lot [after] construction.

So it might have been $80 million.

I think what he's asking is whether or not that's in the budget for The Palazzo as opposed to being [inaudible] budget.

Well, if that's what he's asking, that is in the -- the incremental construction that took place after 2003 is in The Palazzo construction budget.

Okay.

The original costs that we incurred to build in 2003 was part of the Venezia expansion budget.

When did the 450,000 square foot meeting space open?

We opened that incremental space partially in November and partially after the first of the year this year.

What happened was since the [seal] structure was already there since 2003, we had the opportunity to open that space well ahead of the opening of The Palazzo.

So we took the opportunity to get one issue off the development and construction block and have an asset contributing sooner than later.

Okay.

The Palazzo to date that we spent is just about -- it's $940 million.

In terms of the capital costs for both The Palazzo and The Palazzo Mall, that -- the budget on that project is currently $1.8 billion to $1.85 billion.

So we're roughly halfway through the spend.

And what is the debt at the bond holder level?

The restricted debt?

At the bond holder level?

At [inaudible].

[Crosstalk]

[Inaudible] level.

Yes.

The bonds are at the parent company.

And the total indebtedness on the parent company overall is -- pardon me?

It's a $250 million issue.

That's outstanding at the parent level.

Okay.

Great.

Thank you.

Your next question comes from the line of Steve Kent with Goldman Sachs.

Please proceed.

Hi.

Maybe you could just comment a little bit about what you're thinking on the pricing for the serviced apartments on Cotai, especially given [Shuntock's] recent comments about their one central property selling out at a very nice clip, at least initially.

And what that value creation could be from the serviced apartments, just as a reminder.

And again, sort of the $9 billion to $11 billion of spend overall in Cotai.

And then the second question is just on Hengpin, you mentioned maybe some of the issues that you're facing with that before proceeding, which would -- I think my recollection is that it may be tax rate, it may be Visa issues, it may be some other things.

What kinds of things are sort of out there that -- or a better way, I guess, of asking is is there any of those issues that would sort of be like, we're not going forward?

We can't get comfortable with one of those issues?

Let me understand.

On the second -- okay.

Let me start with the second question first.

Here is -- here's what's difficult to do in an environment like this.

I'm being very careful with my wording because you never want Central Government to think that you are doing something that oversteps your bounds.

So you have to be clear about what decisions have been made or have -- about the real estate development, and those issues that are still policy decisions.

Policy decisions are directed by Beijing, and when we talk about things like cross-border communications, when we talk about things like money exchange, those things are clearly and squarely in the hands of Beijing.

Those are value adds that will make Hengpin even more valuable than now.

If the government decides to allow Hengpin to handle cash transactions, currency transactions, it's a big deal.

Okay.

That I understand.

Thank you.

If the government -- if the government allows cross-border -- in other words, if they allow almost like a bonded area to where you could freely go across from Macao to Hengpin Island, those are items that are on the table that the government reserves the right to make the final decision on.

Those decisions wouldn't change our mind about the real estate development on Hengpin.

It would just enhance the value of Hengpin.

Steven, this is Sheldon.

To address your first half of the question, the original anticipated price per square foot, since this is going to be the only destination resort strip in all of Asia, we feel quite confident that the -- we're going to reach for the upper levels.

And in some cases, I think -- of course, we're going to go out at the same numbers.

But I'm hoping that we'll -- it will turn out to be that we've been quite conservative.

On the freestanding apartments at the Four Seasons, the vacation suites, we hope to get -- original plan called for $1,400 a square foot.

Now in Hong Kong terms, when they charge a price, they include the square footage of the common areas.

We hope we'll be able to do that in all of the Cotai Strip.

The balance of the apartments were always on the opposite side of the strip.

They were integrated into the existing buildings [inaudible] the top floors.

We anticipated those at $800 a foot.

I think, however, we could probably nudge that up a little bit.

Hopefully, we can move it up to $1,000.

But I know those are not the numbers in Macao, but they're not on the Strip.

There's going to be a once in a lifetime opportunity for these Asian people to get a -- an apartment on Asia's Las Vegas Strip.

And we are confident that the prices will be accepted readily.

Okay, Sheldon.

Thank you.

Okay.

There are no further questions at this time.

I would now like to turn the call over to the hands of Mr. Bill Weidner.

Thank you.

I just want to summarize by saying that we had a very good operating quarter.

Our development and our construction activities have moved forward, both in Las Vegas and in Macao.

Our activities in Macao and in Singapore particularly have solidified our reputation in the mainland China as well as in Japan.

So we made a -- we remain extraordinarily bullish about our future, near term and long term.

And with that, hopefully, with the summarization of our conversation today, I thank you all for joining us, and I look forward to our next quarterly conference discussion.

Thanks again, and have a good day.

Thank you for your participation in today's conference.

This concludes the presentation.