拉斯維加斯金沙集團 (LVS) 2007 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Las Vegas Sands Corp. 2007 first quarter earnings conference call. My name is Patricia, and I will be your coordinator for today. (OPERATOR INSTRUCTIONS) At this time I would turn the presentation over to Mr. Bill Weidner, President, Las Vegas Sands Corp. Please proceed sir.

Thank you, Patricia and good afternoon, everyone, and thank you for joining us. Sorry for the slight delay there. We were connected to the wrong group, the wrong conference call before. But anyway we are ready to start today. And with me today is Sheldon Adelson, our Chairman, Brad Stone, our Executive Vice President, Scott Henry, Senior Vice President, Bob Rozek, our Chief Financial Officer, and Dan Briggs, our VP of Investor Relations.

Before we begin, 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 those forward-looking statements. Please see today's press release under the caption of "Forward-Looking Statements" for the discussion of the risks that may affect our results.

In addition, we may be discussing such things as adjusted EBIDTA, adjusted net income, adjusted EPS, and adjusted property EBIDTAR, which are non-GAAP measures. A definition and reconciliation of these measures to the most comparable GAAP financial measure is included in the press release. Please note that this presentation is being recorded.

By now, you should have all received our press release detailing our financial results for the first quarter of 2007. We're going to keep our prepared remarks today to a minimum. Beginning with some abbreviated highlights, moving on to a few concluding thoughts, and then we will take your questions. First quarter consolidated adjusted EBITDAR came in at a first quarter record $214.4 million that is a 4.8% increase over record first quarter of 2006. In Macao, The Sands delivered another strong quarter in the Macao Peninsula reaching another record quarterly gaming win; our VIP and slot business both achieved record levels of drop and win. Our visitation numbers continue to increase. And our mass table games business remains healthy despite significant additional high-quality capacity being added by competitors on the Macao Peninsula.

First quarter revenue at The Sands Macao came in at an all-time record of $350.4 million. That is an increase of over 24% compared to the first quarter of 2006. Adjusted EBITDAR at The Sands Macao came in at just over $102 million, which is about the same as one year ago. Our results at The Sands were burdened by approximately $12 million of expenses, principally for labor costs and junket commissions that were incurred to position us against new competition and to assure a smooth opening of the new Venetian Macao this summer. Those extraordinary expenses will end when we open the Venetian Macao later this year.

On the VIP market side, rolling volume was at an all-time record of $6.86 billion in the quarter up over 85% compared to the $3.70 billion in the first quarter of 2006. The major construction of the Venetian Macao is essentially completed, both on time and on budget. We are increasingly focusing our efforts on the pre-opening activities including the fit out of our restaurant and retail space and the launch of our initial marketing efforts for the opening of that property.

Those initial events or initial activities include our sponsorship of the upcoming Venetian Macao Cup featuring the Manchester United football club who will play Shenzhen Shide of the Chinese football league on July 23, at Macao Stadium. The star-studded Manchester United football team with Ronaldo, Rooney and the like will be the first guests of the Venetian Macao, which will open to the public a few weeks thereafter. In October, the NBA's Cleveland Cavaliers featuring LeBron James will play the Orlando Magic and the Magic will play Team China and at the Venetian Macao's 15,000 seat arena. Both of these activities will be broadcast throughout China and around the region. These high-profile type events are just the beginning of a series of activities and events that will position our Venetian Macao as a first Las Vegas style true destination resort.

Turning now to our convention and exhibition business. We've now contracted more than 20 trade fair organizers for 44 separate exhibition events through 2009. Separately, 20 corporate meeting organizers have contracted to host corporate events at the Venetian Macao in September, October, November, and December of this year. Organizers of these meetings include such globally recognized household names in the financial and professional services, the pharmaceutical and industrial sectors. The Venetian Macao put out a press release yesterday as part of its selling efforts that gives more context and detail to these results and actually names the names of the events of the corporate meeting planners etc. That can be referenced and you can pick that information up individually, if you like.

On the tour and travel side of our activities there in Macao. We have now signed agreements with 111 tour and travel operators in Asia. Including most of the key wholesalers of tour operators in all the major cities and countries of the region.

With respect to progress on the development of the Grand Canal shops and the adjoining Four Seasons Mall in Macao we now have 450 tenants under contract and have executed final leasing documents with over 150 of them. Construction of tenant fit-out has now begun for certain restaurant tenants. Our average base minimum rent continues to exceed $135 per square foot. Leasing incentives have been consistent both with our expectations and the high-end retail market in Hong Kong.

On the remainder of the Cotai Strip, the Four Season remains on track for a first quarter of '08 opening. We're out of the ground on sites five and six doing sector operation work on site seven and eight and design work continues on what we call sites three. Moving on to Hengqin Island our engineering, design, and architecture teams continue the collaboration with the Zhuhai Hengqin Island project coordination committee and their consultants. Zhuhai's overall plan for the development of Hengquin Island of which our plans are a component has now been submitted to the appropriate authorities in the Guangdong Province for their review and approval.

Back in Las Vegas, first quarter EBITDAR for the Venetian was $112.1 million up 11% compared to the quarter one year ago. ADR was $276 and RevPAR was an all time high for the Venetian at $273, up more than 10% compared to the first quarter of last year. Palazzo construction is on time and on budget. We top off the building in June. And we announced yesterday that the Broadway hit Jersey Boys would take up residence in our theatre at the Palazzo. Our retail leasing activity at the Palazzo mall is going well and is a little over 80% complete so far.

In Singapore, our construction is now advancing at a steady pace. 650 construction personnel are on the site each day. And we poured over 600,000 cubic yards of concrete as part of the preparatory works for the hotel substructure. We remain on track for an opening of that resort in 2009. In Bethlehem, we'll begin the demolition and salvage work this week to prepare for the construction of our integrated resort there. We are planning a formal groundbreaking ceremony for The Sands Bethworks on May 14th. That concludes the highlights.

We're clearly executing across the board on a number of major initiatives. But before we go to Q&A, let me summarize the enthusiasm we feel as a Company and as a management team.

First in Las Vegas our property is performing exceptionally well. And before the end of this year we will unleash the full power of our convention business driven model by opening the 3,068 room Palazzo. The Palazzo is designed to extend and broaden the highly successful Venetian business model. It's intended to capture fully the backup house efficiencies of operating both properties out of the same backup house, to deliver stronger margin. And it has been specifically designed to appeal to our increasingly important high-end Asia gaming customer.

On the Macao Peninsula, The Sands continues to perform exceptionally well. And we will add 238 rooms to its product mix in the third quarter of this year. The Sands is demonstrating its first mover advantage as Macao's first 21st century casino. It's built right, it is built for the right market, it's at the right location, it's at the ferry terminal and on Avenue Amizade. It is easy to see, easy to get to, and in, and to get out of. It contains the right infrastructure to appeal to Peninsula Macao day trip market. And it is doing very well against wave upon wave of new me-too products coming into the Peninsula marketplace. But just months from today we will begin in earnest to realize the full potential of Macao's future. And lead to the transformation of Macao from a gambling locale to a world-class resort, full-fledged destination with the opening of the Venetian Macao on the Cotai Strip.

The most recent growth statistics in the marketplace clearly support our strategy to be long Macao and the trends within that growth. For example, there are 34% more 4 and 5-star overnight room guests in Macao in February. For another example, strong retail sales statistics are evident at The Wynn Macao. Our advance booking of trade shows and conventions and our tour operator contract abetments for the Venetian Macao also all bode well as indicators that our long-term strategy for the new Macao as Asia's destination is right on.

Additionally, we continue to develop millions of square feet of branded destination product on the Cotai Strip, while we aggressively advance our projects in Singapore, Bethlehem, Pennsylvania, Hengqin Island. And continue to pursue additional development opportunities around the globe. So, we're clearly running at full speed. But rest assured as we move ahead our number one focus remains the same, execution in operations, in development and the identification and aggressive pursuit of future opportunities.

We remain confident that the execution of our strategic plan will produce tremendous results and industry-leading returns. And with that introduction and that conclusion I would like to now open it up and ask the operator to begin the Q&A session for our management team.

(OPERATOR INSTRUCTIONS). And your first question comes from the line of Felicia Hendrix, representing Lehman Brothers, please proceed.

Hi, good afternoon guys. Just a couple of quick questions, first I just was -- your rolling chip volume at -- in Macao was fantastic, and just wondering according to the numbers that I'm seeing, it looks like the property overall lost a little market share in the market for the quarter, just a tad. Wondering if you actually gained share in the VIP area or if the strength that you are seeing is just an indication of the market, the growth of the VIP market overall. And then my second gets to the comments that you made, Bill, about the 44 events that are booked at the Venetian through 2009. Wondering if you could just put some context to that for us. And what is the ideal number per year, what do those 44 events really mean?

Okay, we should start with number one first in terms of market share overall. Brad, do you want to --

Yes, the -- if you look at our history, obviously, in this segment, we continue to grow, and you break it down into market share and fair share ratio, and yes, we've seen strength out of our market share fair share ratio grew in the fourth quarter and maintained about the same position in the first quarter, which is -- was above our fair share, in terms of the number of units. Obviously, we've added units, we added about 17 units to our mix. We were up at 78 tables in the VIP business. So, despite adding capacity in the summer of last year, we've been able to continue to grow that business. I'm very pleased with that portion of our segment. And of course, if you look at our win in that segment, we held a normal range and so the -- I think the rolling volume is fairly indicative, there's no aberration there in terms of low or high hold percentage against that business.

The business in Macao seems to be fairly robust, but again, we're more than keeping pace with it. I've got to believe we're the most aggressive in terms of a single property, in terms of individual VIP rooms. And again, we're doing it kind of with our hands (inaudible) we've only got 51 suites. And I think for the Sands property, the good news is we're adding 240 units. And those 240 units aren't just guestrooms, they are suites, there's multi-based suites and there are suites that average -- where the typical small one is about 900 square feet, with its own living room area and bedroom area. So, it's upside for us there and we feel very positive about that segment of our market.

I'll take the next

You can hitchhike on the back of my comments.

Oh, okay.

Felicia, just to -- since last quarter, I think -- trying to put 44 events for -- through 2009 in context, I think it's better to take a look at that -- what we talked about last quarter and this quarter. Last quarter, we had something in the area of 30 total events. So, we've added 14 events just in that three-month period. I think the important thing here -- the toughest part of advance selling a convention center is convincing people that, that piece of dirt is going to be a place they're going to put their convention or their trade show in. So, as you get closer to opening and close to completion, you actually show people product, the pace of booking picks up naturally. So, 14 events in a three-month period represents a 48 event, annual booking pace overall. So, the pace is something to look at, that's something that's very important, but we'd expect that then to continue and to get even better. But secondly, we now talk about 20 corporate events in the first four months, so it's either more important for the shorter-term booking business and as they see the actual carpet on the floor, the meeting planners can feel comfortable that within the context of a September-October-November opening, there'd be a place to hold their meetings.

So, I think the velocity is something to really take a look at. Now, the longer term booking events that is the trade shows that now we have 44 of, those are usually larger functions, they take place in the exhibition center. The shorter-term corporate events take place more in the carpeted space generally. But we're pleased with the way the velocity is picking up as people actually can walk in the building and touch it and feel it. And I think you'll see that pace continuing. So, that's (inaudible) my initial comments, Sheldon has some comments.

This is Sheldon Adelson of the giant rats -- I'm sorry -- I meant the MICE giant. The MICE giant that's Meetings, Incentives Conferences and Exhibitions, that's what they are now calling me in Asia. If 44 shows were full house shows, that is they occupied the entire exhibition center, that'd be about all we need and all we could accommodate during the course of an entire year. During the course of two years because if you understand that in the exhibition business, it's typically -- at least in the United States, there are two days of move in and move out time for every day of show time.

So, if we have -- if you divide a four-day show, which is the average and two to one is eight, so it's 12 days divide that into 360, you can only have if you would have shows not considering holidays and not -- and considering every show that if one show moves out on a Monday night at midnight at 12:01 a.m., the next show starts to move in. Of course, that never happens, but from a practical maximum occupancy viewpoint, you can only have about 22, 24 shows. But in China, their holidays are not just one-day holidays, like this is Golden Week, and the Golden Week will take one full week. So, we're working on those matrixes, but 44 full house shows, they're not starting with full house shows, there's a lot of those are incubator shows. Some of the shows that are being moved in total -- the mature shows from other locations. I'm very, very happy, we have 44 full house shows, we're full and we'll need more exhibition space before we need more customers.

Thank you very much for that answer. Just also -- just quickly, the $12 million in the investments that you had or the higher charges in the quarter, can you break those up between labor and VIP?

Yes, the -- in the quarter, we have a program, it's called the, "Junket Retention Program." We put it in place -- we realize when other properties were going to open in Macao that we were going to be at a product disadvantage, particularly in terms of rooms. So, we decided in order -- we're seeing good velocity in our junket business, it was important for us to maintain that, and to grow it as we opened the Venetian property and other properties in the Cotai Strip. So, we put a program in place, it was meant -- and it continues to be a temporary program to bridge us from the time our competitors opened and we're able to offer room product and competitive things that make us product competitive. We're against that market, we've been somewhat hamstringed by again lack of particularly a room product. That program in the first quarter was about a $6 million program, just over $6 million.

And again, we believe that's a cost that will go away as we wind down, open the Venetian property, bring room product to The Sands property, and we don't see that as recurring expense. But we feel it was a good investment for us to maintain the type of velocity we have in this business segment. The other expenditure is roughly about $6 million as well and that's the investment, I'll call it our employee retention program. Obviously, we've done very well there. I think our employees are viewed as probably the best employees in Macao. I think, certainly, the Wynn Resort has done a great job as well, but at the time when Wynn was opening and StarWorld was opening, we were the employer of choice. And we were certainly going to be the target of individuals.

Now, you don't want to lose people in your property as, one, you're expanding it, and two, you're opening a significant asset like Venetian Macao. So, again, we chose to invest in our people similar to our junket reps to bridge ourselves to the point of opening the Venetian product. By that we ended up promoting people in advance or actually paying some people in positions they were not actually occupying. But they will be promoted either at The Sands or at the Venetian property as that opens. And we've invested dollars that we really can't take and charge off against a pre-opening line item. These are people that are performing functions that are somewhat -- staffing levels are a little higher, so people learn about it. And that also -- again, putting people in positions and training them so as we open the Venetian product, we open it smoothly, professionally, and we maintain the quality of the workforce. Which I think has made a difference and is necessary to have to open a world class destination like the spectacular Venetian resort is going to be. So, those are -- it's really a fifty-fifty break up Felicia.

Okay, thanks a lot, thanks guys.

From the line of Bear Stearns, with the next question, we have Joseph Greff, please proceed.

Hey guys. Quick question on Sands Macao, sort of big picture, maybe from a revenue and margins perspective. In terms of when the Venetian Macao opens, the impact on Sands Macao now that you have, I guess, some experience in terms of other higher quality capacity in that market impacting the peninsula property. Have your expectations changed there in terms of how that property does once Venetian Macao is up and running?

I think we remain very -- believe we're very fortunate as Bill mentioned, in terms of location of our assets. Venetian Macao is going to have a real impact in Macao over the short term and over the long term. It's going to redefine the marketplace. It should initially impact most of the operators and The Sands will not be an exception to that. We believe, however, the thing we have going for us with The Sands is, one, its superior location as a daytrip type of property. And also the fact that we are coming in with asset. We are coming with a substantial amount of room product to bolster that product.

So, while we feel there will be an effect, we feel that the effect won't be draconian to us. We certainly -- one the positive effects The Sands will benefit from is the fact that as we open The Venetian it's going to see a lot of its cost burden shifted, as we consolidate the operations of finance, and computers, and all these things similarly to what we always talked about here at The Palazzo and The Venetian. So, the two positive things that The Sands has going for it is first of all, reducing our cost structure I talked about with Felicia, those expenses go away. Second of all, an economy of scales by operating the two properties on a consolidated basis and much more efficiently than it was operated as two singular standalone properties. And thirdly, asset coming on in place, that again we believe will help shore up some of the markets that we've had some challenges with over the short term. So, those things all being said, I think it would be Pollyanna to say that it won't see an effect, it certainly will. But we believe that The Sands is very well positioned, and we continue to invest in that to make sure that, that property remains very strong and very viable after The Venetian opens and subsequent Cotai Strip properties.

We don't know, for sure, about the impact on The Sands, but we do have a strong belief that the peninsula will be impacted by the opening of The Venetian. But the -- when Brad referred to location, we're the only property that's within walking distance from the ferry terminal.

Great, thank you, Brad. Thank you, Sheldon.

And representing JP Morgan with the next question we have Harry Curtis. Please proceed.

Good afternoon. I wonder if you could address some investor concern over the preparedness of infrastructure prior to The Venetian's opening? And will they be able to get from A to B easily?

Well, the two short-term pieces of infrastructure that are important for The Venetian is the ferry terminal itself, next to the airport, which is literally a minute, minute-and-a-half away from The Venetian. When we essentially -- when the market essentially doubles the capacity of the ferry terminals overall, and then splits the capability to be able to get directly to where you want to go. We think that's a very important piece of that infrastructure. It is under construction. Government has indicated to us that they will allow us to use the landing area of the ferry terminal pier itself. So, that's the key item number one.

Number two, the reopening of the border gate that's right in our backyard. And the reopening of the border gate right in our backyard is that -- the Lotus Bridge. That is to be reopened in a matter of weeks. So, it adds another port, another gateway into Macao. And it just happens to be right there on the Cotai Strip. Buses are also an important part of moving people around. And so, I think, Brad has the statistics on the numbers.

Yes, we -- now again we want to make sure that we as a Company don't like putting our future in other people's destiny. So, we have ordered 80 buses that are coming from Europe. I mean, these are beautiful first quality buses manufactured in Germany, various sizes, 25 passenger, 35 passenger, 45 passenger. And we want to ensure that we have a presence at all the -- the two -- eventually, the two ferry terminals, the border crossings, and ensure that we have adequate transportation to move people to the existing Sands property and, of course, we already have existing busing. But those 80 buses will ensure ourselves a huge traffic flow and capability of moving people to The Venetian Cotai resort. And again, we feel that the bus opportunity is -- our front door is right there at the border. So, when they get off the buses, I mean, off the ferries or across the border, we want to make sure we are there with a strong presence, with a great looking product, with great looking people because that's the first opportunity we have to sell to that consumer. And we want to make sure they know where they're going. They're going to the best places, and they're getting on the best transportation to get them there.

In that same category of controlling your own destiny, of course, we have 12 ferries that will be arriving over the next, approximate, eight months.

Ten.

Ten. We have the right to be able to provide the other two in the line. So, we have the capability of being able to add two in that production line. But 10 will be delivered. The first couple will be delivered this year, end of this year. And then we'll be adding more ferries, yes. We're working with a ferry operator. So, that we will be able to have access to their ferries in the nearer term. So, we have plenty of capacity to be able to bring passengers, either from Hong Kong airport or Hong Kong, or [Shenzhen], or other place in the Pearl River Delta directly to the new ferry terminal. As well as adding more capacity to the current ferry terminal if people want to go to the peninsula. So, I think as far as -- we're not waiting for the government to build light rail. We're not waiting for somebody to show up over the hillside and rescue us. Basically, we want to control our own destiny. And we're comfortable that we have enough additional capacity coming online to take care, not only of The Venetian but the other properties that are coming down the line also.

So as a follow-up, the first type of ferry should be available, when? And then turning to the ferry terminal on the peninsula, which is in large part controlled by Stanley Ho. What assurances is the government giving you, if any, that he won't take advantage of his ownership position and shuttle guests towards his buses?

What he has -- something he has is control of his ferries. I mean, he operates the ferry terminal on a concession from the government. And in that concession he has to provide equal access to any ferry operator. So, he doesn't have the ability to "choke off" ferry access. And when people come out of the building those building are -- those people are free to go to whatever casino they want to. And so, even if he brought his own ferries, and even he brought it to his own terminal we get most of those people coming to The Sands anyway. So, there is really no way of him controlling us out of the market, overall. Just as he can't do that even today as he has all the ferries and controls that particular terminal.

We have a -- we have berths at the Shun Tak, which is his company, a terminal in Hong Kong that we'll operate from. And we'll have -- we'll be -- we're getting delivery in November and December. It averages about two ferries a month for -- from December through March or April. And there will be no specific casino operator to operate the new type of terminal, which will have 16 berths compared to the 12 berths that they have at the peninsula ferry terminal. And the difference is that -- one of the differences that he's got smaller buses -- Smaller ferries that average about 200, 250 a trip. We've got 430 passengers on each ferry. So, there'll be no private agenda on whoever operates the new ferry terminal because we tried to get -- to operate that too, and we have been able to get it.

Yes. We're trying to dominate --

We will. Why? Because we're going to have most of the business, we [have] most of the ferries coming there. So, that's not a problem. The governments of Hong Kong they auction out the, or they assign ferry berths every month. So, there is no -- he has no long-term. We've already -- we've gotten a location in the Shun Tak terminal for our ticketing booth and everybody said we won't be able to either have berths at Shun Tak ferry terminal. We won't be able to get space inside of it. We won't be able to get berths in Macao. We've got all that overcome. And we have now two or more choices on retaining different ferry operators.

Okay. Thanks guys.

With Jefferies you have a question from the line of Larry Klatzkin. Please proceed.

Couple of questions here. First of all, what's the status of Japan as far as you see that going preceding ahead with possible gaming?

I was in Japan last week. I was asked by the LDP committee that is studying casino gaming to address their committee and their advisors at LDP headquarters in Tokyo. They specifically wanted to have information about the process and the development of the Sands Marina Bay property because they see the Singapore model as being the model that they might pursue. But with all that, I think it's still as mysterious, I think, as any political process will be, particularly in Japan. They were curious, interested. There are about 20 members of the Diet and about 50 of their advisors in the group itself. I made a presentation about what we're doing, what we're doing here, what we're doing in Macao, and, certainly, what we're doing in Singapore. But again, I think it's hard to handicap it. They say that they think this is the time to kind of put the suggestion forward. On the 24th of July, there'll be an election of the Upper Diet, or the Upper House of the Diet. They say behind that, partially depending upon on how well the LDP does there maybe a movement of the legislation. And if there were movement this year, it would formally go before the Diet next year, in 2008.

Even if it did move at that kind of a pace, generally Japan moves at something of a snail's pace relatively. Even if it did move in 2008, I don't think we would see actual adoption until 2009, 2010. But -- look it's encouraging. I mean, the fact is what we're doing in Macao is having a real impact on all the regional governments looking at this development of the Las Vegas strip in their backyard, number 1 and number 2 of this -- our selection and the development of the Marina Bay integrated resort is also turning a lot of heads there. So, I think it is making governments in the area think. They are by their nature generally pretty conservative, overall. But I think there is opportunity there over some time horizon. I think that's the best description I can make.

All right. That's good Bill, and I appreciate that. And then as far as -- it's one technical question, I guess, for Scott. The $46 million of corporate CapEx just what would the nature of that be?

Sorry, Larry, the $46 million of corporate --?

Corporate CapEx.

CapEx.

Yes.

Yes, airplanes.

It's down under the CapEx paragraph, this $46 million corporate.

It's airplanes, Larry. It's airplanes. We --.

It's the fleet being deployed in Macao now, similar to the fleet that we have deployed here in Las Vegas. We are now adding a fleet being deployed in Macao now for the regional market places there to fly customers in.

Okay, excellent, okay. As far as Singapore goes, you seem to have a quite a good facility there. Is there any indications as far as people looking at the mall you're building in Macao and already hitting you up and saying, hey, can we talk about mall business in Singapore. Have you gotten some already, some cross-fertilization?

Well, I just talked to the head of leasing last week. In Singapore, well, he is stationed in Hong Kong and we have people Singapore. He says, and I'm not sure, he might have been exaggerating a little bit because the last number I heard was about 30% less. The last number I heard was about 360 companies on the wait list. The number I heard last week. And he said he was certain of it. It was 500 companies on the wait list.

So, this is for a mall you haven't even announced the structure pricing, or what exactly you are going to offer?

That's correct. But everybody knows that the integrated resort is going to be the focal point of Singapore for tourists. And everybody knows that our mall is going to be the must-see mall in Asia. We're doing things like the Rockefeller Centre Skating Ring. We're going to have a skating ring in the mall. And a lot of it's going to be facing out. It's going to be a big magnificent physical structure. It's going to be very unusual. It's on like three levels. And Singapore is a city of shopping. And everybody that's there from the most high end to the most local, to the most casual, to the most mid market, everybody is pushing. I think we can push the edge of the envelope as far as it's ever been pushed in a single mall anywhere in the world. Even on the restaurant side, when we were talking about what the average sale per -- rental per square foot would be on the regular -- regular non-food and beverage retail. I'm talking about the restaurants they weren't too far away in terms of pricing. So, it's -- we're very optimistic about what Singapore is going to do at the mall.

Excellent. Thank you guys. I appreciate it.

By the way, Larry, how come you weren't first on the q-and-a?

It's a luck of the draw.

You're getting old.

Bite your tongue.

Your next question comes from the line of Steve Kent representing Goldman Sachs. Please proceed.

Hi, while acknowledging you've always said that The Venetian Macao would open up sometime over the summer. I think many of us, or some of us at least had more of a July or even early August opening. Could you just comment on the late August opening? Is it a function of labor, construction, retailers getting ready, timing of marketing events, or any other issues?

Well, there is a combination of things. The primary driver is making sure we have adequate capacity of restaurants, mall space et cetera. So, yes, we're balancing the fact of opening the property, and opening it we want to open it very positively. You know, certainly when you put tenants and their stuff you have to work with those people to get them access and get their places built. And, really, that's the stage we're in right now. If you went over to The Venetian Macao today, the property is well on its way to completion. And we really as we I believe said in either the press statement or Bill said in his statement we're in the real fit out stage now with tenants. Most of these tenants, particularly on the retail side are tenants that do a lot of work in that part of the world. Their fit outs are very quick. They -- in many cases replicate the same store over and over. So, it's not like -- perhaps like when we had Grand Canal Shoppes here a lot of the tenants were onsies and twosies; these are all international and national brands. And so they're pretty good at doing that. And certainly we're getting the -- we're into the phase of getting the restaurants fitted out. Additionally, we are sensitive, and we have to be careful about the Feng Shui issues that we face in Asia. It's a very important part of the culture there. We have to be respectful of it. So, we do find our selves somewhat dictated in terms of opening dates within certain timeframes of being sensitive to Feng Shui issues. And so, we work with our Feng Shui master there. He works with us on various dates that we can do it. And that dictates some of it as well. But the property is just absolutely incredibly stunning. And I think that if we open a couple of weeks later than we had hoped for I think the result is going to be -- it's just going to be something that that part of the world, even this part of the world has not seen before. It is truly coming out far exceeding my expectations. And so that's where we're at.

I'd just like to put it in a -- the old trite phrase that there is good news and bad news. The good news is that we have -- our fundamental marketing strategy says that we sell -- we build core and non-core assets. And we sell off the non-core assets to pay for our core assets, that's the good news. Now, the good news also is that we're selling retail space that's significantly higher that what we can base rents here, and as percentage rents over there. Percentage rents go up to 18% over there on some of the retail. And the lowest is about 12.5 with a couple of minor exceptions. But it's very good news over there and very high shopping expectations. That bad news is sometimes you got to rely upon other people working at their pace, and they don't go as fast. So if there is any -- put your finger on any part of the delay it's that you got to rely upon hundreds of other people to get their work done. And -- but the good news is worth it many times over. We ain't finished with the property today. We just looked at a set of pictures that just knock your socks off. Knock your socks off they were better looking than my own airplane, which I'd like to look at -- I mean pictures. So --

This is pinup girls. It's kind of his, Sheldon's pinup girls of airplane pictures.

Yes, that's a picture of my wife. So, that's it. But, could we open that early? Yes, we could have. But all the restaurants and they think we're going to -- we're learning from this and we're going to do things differently in other ways. We can't change the retail portion of it. So, we're going to try to get that retail portion turned over a lot earlier by focusing on taking these things off the critical path. We're getting them on earlier in the critical path, so that everything, the showrooms, the retail, the restaurants can all open simultaneously.

I think --.

That's what we -- we'll hope that's what we shoot for in future developments.

And the other thing to point out is we're pushing a very large pig through the pipe on there. The fact is nobody has ever built anything of this scale in Macao before. And we're building to entirely different building code because although our competitors do nice places. The fact is they're boxes that have a high rise stuck on them. And the buildings we're building on the Cotai Strip, every one of them, is built to a code that didn't exist in Macao before we proposed the kind of buildings we proposed. So, big atriums, high ceilings, air excavation systems, fire systems on pieces of property that are -- or pieces of building that are 500,000 square feet. Things like that, they didn't exist in Macao before, so -- and they're learning as we are building too. So we're pushing -- I mean, the biggest mall there had a dozen stores in it, and we're pushing 380, or 400 store units through that python at the same time, so --.

But we're doing things that nobody's ever done and nobody else is doing. So they're trying to get used to it while we're trying to get used to it at the same time.

Our construction people have pulled a survey and said that we're the second largest structure in one building effort in the world. There is an industrial building that's 10.6 million square feet, this is 10.4 million square feet, it's about one-and-a-half or one-and-two-thirds Pentagons. So, you could say we're the largest non-industrial building in the world.

Okay, thank you.

And your next question from the line of Robin Farley representing UBS, please proceed.

Great, thanks. I wanted to get some more color on the expense you talked about at Sands Macao, the higher commission levels in advance of the Venetian opening. Do you expect it to continue, the spending of this -- the $12 million in the June quarter as well or could -- will that go higher? And then also are competitors matching those higher commission rates, and if so then how do you get comfortable that it's only a temporary increase in expenses?

All right. I think first of all, to answer the first question. I think it's going to be a similar situation in the current quarter, the June 30 quarter. We -- again are bridging ourselves for that opening and I think we'll see that diminishing [roll away] during the third quarter. So, I think you can anticipate similar types of levels. I don't see anything driving it up. I think it will stay about where it is Robin.

As far as competitors, some competitors have chosen to be more aggressive, but that's been happening all along, I think you can fight this battle, so to speak, with consumers on both -- on either a capital basis or a marketing incentive driven basis. Our belief is we have to have a very competitive rolling chip program, and we -- after we back down off this junket retention program, we'll still have one that still is at a 1.1 level.

But we think with the product we have to offer and the experience we have to offer, balanced with what is still a very, very competitive rate, that some of the secondary properties that that's used perhaps that more aggressive -- it's a classic pricing issue, it happens whether it's cash back programs and coin. Whether it's comps and whether you get, you know. It happens across the street. Harrah's offers a better deal on rooms than the Venetian offers on rooms then the -- and we price ourselves differently, and people choose what asset they want to go to based upon a whole myriad of decisions.

So we won't be uncompetitive, we will still be very competitive in terms of our commission program, just as we feel we can back down once we have more basic products that the customer needs. And you know what we'll probably lose some customers here and there, but we think we'll more than pick up many times over where the assets we're putting in play to overcome that. We just think it's the thing we should do, we don't -- we aren't going to fight the battle at both ends, both on a capital and marketing basis. We're choosing to be competitive from a marketing basis and we're going to be super competitive from a product basis.

Some of that cost obviously -- we opened in 2004, a lot of the dealers and the base level employees that we brought in, we brought along, trained got them ready for supervisory positions, unfortunately, we had three major new competitors open in the timeframe when those prime people will be prime to be then be promoted to the next level of supervision or floor person or whatever. So, we couldn't really let that happen, so we in essence advance promoted and called it "advance paid," many of the hundreds of people that we needed to be the supervisory people when we opened up the Venetian.

If we'd had our way we could have waited longer but the realities are in that kind of marketplace you have to do what you have to do in the near term to make sure that you have the supervisory people and the higher quality people to then open that big place coming down the street, that is the Venetian. So, that's what's really driving a lot of those wage rates in the near term.

So it was really the commission levels more so than the labor rates are you worried about being an issue?

Well, labor rates make up most of the difference, more than the commission rate difference.

And then, my another question is --.

Wait, wait, Robin, I didn't mean to interrupt but if you look at the inflationary rate in terms of -- most of the growth in our labor cost has been this promotional thing, it's not being driven by high escalation of wages. That's a much smaller component -- that $6 million, that's a smaller portion of it. It's like $1.2 million of that, $6 million is wage inflation the rest of it is what Bill just articulated. So, I think that's important to understand, we're not seeing -- yes, we're seeing here and there some wage escalation, but it's not rampant in Macao.

Okay. And the minor question was I wonder if you can update us on your expectation for timing the approval of final approval for Hengqin and also there were recent proposals from China to sort of cool a real estate market, that proposed eliminating the pre sale of units and introducing different taxes on developers and capital gains and things. I wonder if you can talk about, I guess I don't know if you would handicap the chances of those proposals and how that might affect things at Hengqin?

Always hard to predict, I mean, that those series of suggestions came out of a think tank group that said okay, given the overheating in China and given the overheating particularly in the real estate markets. What could be done to possibly reduce that overheating so that's a laundry list of things that might be done whether they get adapted or not, I don't know. Whether they get adapted differentially, because certainly Hengqin Island is a place that China wants to incent the development of.

And what they want to do is they want Hengqin Island to be master planed in a way that's consistent with what central government wants Hengqin to become. They see Hengqin as being a support to what's going across the way quite frankly driven to a great extent by us in terms of the development of the Cotai Strip, so they're trying to think in terms of how ought this thing to be developed and in what categories of development makes sense as far as their master plan for a basically the Pearl River delta triangle Hong Kong, Shenzhen, Zhuhai, and Macao.

Part of that is how the bridge fits in with it, so there are many, many moving parts so that's why I am reluctant to give an estimate of time, because the more that we propose and the more development that we talk about on Hengqin, the more call it multi-tiered involvement there is in their master planning process. There is a light rail that goes down the west side of the delta that connects Guangzhou to Zhuhai and then what they are planning then is the light rail spur that then comes from the Gonbei gate in Zhuhai, that comes right over to the property in the Hengqin Island and then connects up with the Lotus Bridge. Where the landing area of the bridge that connects Hong Kong with Macao, how the lines up with that rail station and picks up people to go the other way. I mean, we began this process with what was a real estate development that we had felt supported what we did next door.

What we end up with is a process that we're kind of feeding in to an overall master plan for the Pearl River Delta, that then involves both the government, the local government in Zhuhai, the regional government in Guangdong province and then the central government in terms of millions and millions of dollars of infrastructure expenditure that's being planned for the delta overall. Just a long winded way of trying t answer a question in several different ways. The bottom line we're right at the point of the right physical place to be for where this physical infrastructure goes over the next five to ten years. So, we have to be a bit patient because there are a lot of big wheels turning as it relates to the specific development itself. That's why it's kind of hard to give you an exact date, it is just that all we know is that we are driving to a great extent at least the northern part of the entire master plan that is being driven not just by the locals but by the provincial government Guangdong province as well as the central government.

Okay, thank you.

And the next question comes from the line of Jeremy Cogan representing Banc of America Securities, please proceed.

Yes, good afternoon I've got about three of four relatively quick questions. First as we were talking about what may or may not happen to Sands, The Venetian etc. I just kind of wondering if you could talk a little bit with the Crown opening up here near term. If you are aware if you are sharing room operators, junkets, players, etc., how you think that may or may not impact results on the VIP near term?

A second question I had was just about the month of April I was wondering if you can just talk a little bit about the trends in Macao and/or Vegas in regards to consistence or not with respect to what we've seen in the first quarter. And then Bill, I was wondering if you could talk little bit on the retail. You reminded us of the sequential increase in convention contracts that you signed. Can you remind us of the, maybe the sequential increase in like these final lease agreements? And there seems to be still a fair amount going. There was some stuff written in the press recently. I was wondering if maybe you could just kind of respond to the comments that you might be providing some discounts here or there and how real you think the 135 or so dollar base rents are going forward?

Okay, I guess the three questions start with Crown Macao.

Yes.

And the sharing of -- we wouldn't share ice water with those guys so.

I think -- the question is junket reps they spread themselves out around town there maybe a possibility that people we have reping our place have a presence through some other partnership or whatever. I got to tell you, we really don't take Crown and its location and its product very seriously. So, there has been a lot tougher competitors opened in the last couple of months, at least that's our view of it. And so, we have no indication at least, from our operational people, our marketing people that we believe Crown is going to really have any kind of effect on The Sands. And certainly I think The Venetian will have a lot of effect on it. So, that would be my response to the Crown opening.

I think their bark is worse then their bite.

Okay, now item number two. I have short-term memory.

April trends.

April trends. Well, I don't think we really even comment on those, do we?

I don't think we really -- we don't --

Good try, good try.

Data point --

I just don't recall last quarter's versus this quarter's.

We -- this is Dan. We went from about 400 different retailers that we had aimed at last quarter to 450 this quarter. And we were at probably a couple of handfuls of people that we've done the actual final lease agreement with. We're now at over 150. So, that's a huge jump, and we are at the point where we're signing as many as 10 a week, at this point with respect to extending that 150 number, so, making great progress there.

You have to understand that in Macao they don't sign leases per se they sign grants of use. This is under old Portuguese law, and people are not familiar with it, and so it has taken a while for most of the attorneys in the area to get familiar with it.

And is the pricing on that, I mean it's -- from the numbers you have been putting out, it has been sounding consistent, at the same time there's been some reports here and there, and I was just kind of curious if you wanted to talk to it.

Pricing hasn't been an issue.

You'll be getting different information in the future about our different products because it's somewhat confusing. Our retail number, that is apparel stores, leather stores, jewelry stores, the prices are significantly higher. When we need -- when we put it into an integrated resort, and we have many, many -- we have thousands of seats that we have to put in restaurants, both for the mall visitors and the hotel visitors then the restaurant pricing brings down the average significantly. So, in the future we're going to report pure retail numbers. I think it's too late for this one but in lots five and six, seven and eight and three in Singapore and wherever else we're going to develop we will then report by segment. So, you will see the average kind of segment and you will see the food and beverage, which is lesser. And I think it will be -- the retail will be significantly higher than what we're reporting blended today.

There are a couple of things that we probably would mention. I mean a couple of Johnny-come-latelys mentioned that they may be in the market or they are out of marketplace or whatever. So, we had to do a couple of things just to squash that over because this is -- the malls who are developing 3 million square feet are the black holes of malldom and we wanted to make sure that our traction was correct over all. We are now looking to flip these malls the day we open them. So, minimum rents while their interesting indicators aren't as important as 18% rents on what their turnover is. So, yes we have made a couple of concessions, I guess you would say, in a couple of [TI] places and things like that just to make sure that we solidified and anchored correctly to make sure nobody else could make any inroads. But it didn't significantly affect either the base rents nor did it affect the percentages or the ability to generate income. We have some short-term rental abatements just the land deals at the very end but no more than maybe a two, three month rental abatement process. But again a lot of those were based on how the Cotai Strip opened. Anyway, overall, didn't significantly affect the overall plan and just made sure that we solidified our anchor base as we move forward.

You will find that the cumulative average of concession is significantly less than what the cumulative average of concession would be here by the typical mall developer in the United States.

Got it. And if I can just ask one question more. It relates just the gross CapEx for the Cotai Strip and on the timing of 5, 6, 7 and 8. I know sometimes you might have a tower that's opening at one point and another tower that is opening a little later. Can may be Brad or someone just give us a quick update as to timing in dollars.

All right I'll give you the -- I don't have the dollars right in front of me, so I don't want to necessarily quote on that, but the timing right now is for the Four Seasons property, and it really breaks down to two components. There is the hotel casino and mall component, and we're still targeting the first quarter of '08 for the opening of that asset. The [room] tower at the Four Seasons, the service departments that we'll be selling off is about seven months behind that. I mean that is a 39-story building and obviously it takes a lot longer to construct. And that will be -- will not affect the opening or the operation of the Four Seasons product itself. At sites five and six we're coming up out of the ground. It's a very large site it's really got to be completed in two phases. Phase 1 is the entirety of the podium, the entirety of the casinos basically, and about 3,000 of the total rooms, and some of the -- the product itself. Phase 2 will be the other 3,000 rooms as well as the service departments. That will probably lag some place about eight months behind the phase 1. Currently, we are looking at a probably a late '08, early '09 opening of that asset, as we come up and build that project through. Sites seven and eight, we're currently finishing up the soil stabilization, we are submitting foundation and piling plans. We had hoped, I think we had said by this summer time to be -- commence piling work and foundation work on site seven and eight. And that's our current intention. That project will probably be complete roughly 26 to 28 months after we commence the piling work itself. And site three, we're finalizing the design program of that. And we don't have a specific timeframe. Probably within the next six months we'll start on that project.

So in all we're looking at the bulk of the rooms opening straddling '08 and 9, the balance of the rooms opening up '09 and first part of 10.

Right. And then you've got Singapore that project is well underway we are in the foundation part of that project right now. And consistent with what we've said in the past that is a late 2009 opening for that project. Bethworks -- that project we are starting -- we started an initial demolition of buildings. We're starting relocation of site utilities and that project is probably something we will see in the late part of '08, would be our guesstimate at this point in time.

And the preservation of the guns of the SS Missouri.

Missouri right. Saw the gun last week.

Okay. Thanks a lot I appreciate it.

And our final question will come from the line of Celeste Brown with Morgan Stanley. Please proceed.

Hey guys, good afternoon. First, I think last time Brad, you talked about the mall being opened in its entirety I know you're going to phase it by October. Is that still the goal? Is that still possible?

Okay. Which continent are we on?

Sorry, in Macao, in The Venetian mall.

Okay, Venetian mall in Macao. I think we are talking today, Steven, we we're saying that the second phase of the mall would open probably in the November timeframe.

Bravo.

Roughly the same timeframe.

So, two thirds are going to be open and completed by the end of September. That will be open (inaudible) but the second, third will be what we call phase two that will be open by the end of November.

I think you want to have to remember, each third is the equivalent of the Grand Canal shops. More than the Grand Canal shops here in Las Vegas though.

And then in terms of selling the service departments, do you expect to start selling the Four Seasons any time soon or at least opening up of a site in Hong Kong to showoff the product?

Yes, I think that we -- our lead sales person is joining us as we speak, this is in the next couple of weeks.

Today.

And the physical facility itself is being cleared and readied at the Lippo Tower. Well, we'll actually be opening the initial suite of products.

[Chocolate.]

Right, Chocolate.

And then, you'll start to sell them in the nearer term?

Yes.

Okay, and then, to divert to Vegas for a minute, you talked about $40 million to $60 million of operating efficiencies. How should we think about that in the -- at the Venetian versus the Palazzo, should we take half and subtract it from the Venetian cost today or--?

Yes, I think the way we characterize that is -- the property that they're on a standalone basis, and generating their individual EBITDA, would be burdened. So I think what's the way you have to almost look at it is, currently that burden is being mostly carried by the Venetian itself. So, the Venetian -- I mean you almost say there was 20, it was $40 million maybe the Venetian achieves $20 million of efficiencies and the Palazzo would cost $20 million less to operate. Or if it gets to the 60, I think it leans more towards the higher end of that number than the lower end, that the Venetian will see an efficiency of that. The question is, since its now one credit, how carefully do we report that and worry about allocation processes etc. So we've got up to the accounts to figure it out. But the bottom line is we think we're going to achieve some cost out that the -- Palazzo won't need to incur and some savings that the Venetian will incur.

I guess that you save more money by doing less allocation. So, --

Yes, we can save money by not -- worrying about cost accounting methodology either, so --

Another way to look at it is if the Palazzo can generate, could generate $40 to $60 million less and generate some other cash flow, that's another way to look at it

Yes.

The operating expense avoidance.

True, it's interesting opening the -- you were here the other day walking this through just the last minute. What's interesting is even on a pre-opening basis, we certainly are positioning the Palazzo as a standalone resort. And it is a beautiful distinct property, which will carry its own market and support the existing model of the Venetian plan. But the realities of it are, and it's interesting as we talk about the pre-opening of the Venetian Macao and what a challenge that is. The Palazzo is in essence an expansion of this property and the -- you can just see it in terms of the infrastructure we're needing to build up. It's fairly minor, it's more variable cost. And so we aren't building departments. The buildings were prior -- building over Macao are not the departments we're building here in Las Vegas. And so, it's -- you can see it just in terms of the staffing up, you can see in terms of physical manifestation of office space and physical product, and building docks and surveillance and it's got building surveillance, it's got building IT. The thing is this, if we're not building, there's nobody to put in them, so it's really -- it's a real savings and it's going to help the efficiency of these two properties.

Celeste Brown Okay, great. And then, just one more question, was D&A down sequentially because you had rooms offline, you have rooms offline at the Venetian or is there another reason for that?

D&A --

D&A or E&A, depreciation --

Depreciation and amortization, sorry.

D&A --

Kind of about $3 million sequentially. I can follow-up with Dan.

Yes, why don't we look --

Okay.

That's what was --

Are you suggesting that we don't take the D&A on rooms that are out of service?

Some companies do that.

No, we don't do that.

I don't think it's --

We don't do that, but we'll --

It's too minor to do that.

Okay, I'll follow up with Dan.

Yes, okay, thank you.

Thank you.

Ladies and gentlemen, this now concludes the question and answer session. At this time I will turn the call over to Bill Weidner for closing remarks.

I think we had a pretty thorough discussion, I don't really have that many closing remarks, but as I mentioned in my wrap-up of the presentation itself, there is a lot going on certainly, but we're energized by all that that is going on, because it's wonderful things to be going on. And we appreciate the opportunity to talk to you today and appreciate the questions and hopefully you have the information that you need. And we look forward to next quarter of talking further about the further developments of the Company. So, thanks again for joining us today, and we'll talk to you again shortly.

Thank you for your participation in today's conference. Ladies and gentlemen, this concludes the presentation. You may all disconnect and have a good day.