永利渡假村 (WYNN) 2017 Q4 法說會逐字稿

Good morning.

My name is Nicole, and I'll be your conference operator today.

At this time, I would like to welcome everyone to the Wynn Resorts Fourth Quarter 2017 Earnings Call.

(Operator Instructions) It is now my pleasure to hand the conference over to Mr. Craig Billings, the Chief Financial Officer.

Sir, please go ahead.

Thank you, operator.

Good morning, everyone.

On the call today with me in Las Vegas are Steve Wynn, Matt Maddox, Maurice Wooden and Ian Coughlan.

Also on the line are other members of management from Macau, Las Vegas and Boston.

I want to remind you that we'll be making forward-looking statements under safe harbor federal securities laws, and those statements may or may not come true.

I will now turn the call over to Steve Wynn.

Well, I guess, everybody saw the numbers.

So my comments about them and any relevant -- any other comments going forward.

We have said for the past 2 years, as the Macau market experienced some vicissitude that the fundamentals in China, as in terms of its business opportunity for our company, were profoundly simple and uncomplicated.

I guess, it's the reason why when the stock got ridiculously oversold 1.5 or 2 years ago.

I started to increase my position.

I stress to people who were interested in our company and who invest in gaming that the Macau market is still only touching a tiny percentage of the potential market that's there.

And as these hotels gain public acceptance, we notice the really important changes.

For example, we're seeing now, since New Year's Eve, we thought we have a postseason -- post-holiday slump.

We are seeing midweek business in the mass casino in the $3 million and $4 million a day level during the midweek periods.

So the depth and the foundational strength of that market is real.

We are also encouraged -- we have been encouraged by the government in conversations with them to file our plans for Phase 2, which we're working on now.

As a matter of fact, everybody from Macau is here for design sessions with me this week.

That's why Ian is at the table with me instead of being on the phone from China to develop our 11 acres of adjacent property on the north and south of our existing Cotai land.

We've always been bullish about Macau.

The Wall Street and the investment community has had different moods about this.

I remember that back in 2002 when we had the concession, but of course, has not yet started construction, and we discussed the potential of Macau, the value that was placed upon our IPO was with -- in relation to that concession was 0.

And I don't blame people for having a little trouble getting long-term views on China back in 2002, but I think the picture is pretty clear today.

Having said that, we are coming up -- we did -- we were doing -- operating at almost $4 million level in operating profit per day during December and the end of November.

And we're functioning a little higher than $5 million a day in January.

And we're headed towards Chinese New Year.

And during that period, a couple of significant things happen up here we can stick on the short term, which always seem to be fun on these calls.

We're told that MGM, our neighbor, is going to finally commence operations in the next week or two, at least partially, which will remove some of the obstacles that separate them from us.

Unfortunately, our neighbor on the other side, SJM is still months away, but the Monorail is coming along, but we have been engaged in a very important construction remodeling issue on the whole south side of the Cotai casino, which has constrained our operation in spite of the good performance it has experienced.

And that constraint and that new restaurant and all the related stuff on that side of the casino will be open in a few days and will be available for Chinese New Year in few weeks.

We have a highly anticipated, and this availability of the space and the restaurant and other things that attendant to it, and we're excited to have this construction period with its construction walls and everything finally over.

So we're looking for a very exciting February with the Chinese New Year and our new Red 8 and our new space on the south side of Cotai.

Those are my thoughts with regard to the current situation.

The bridge is coming along and all of that sort of thing.

I think most of you know that about that.

And a lot of things mature in '19, if I'm not correct, Ian?

Yes.

The bridge, the light rail.

We have been hemmed in on 4 sides.

Even the light rail on our fourth side, because we have streets on all 4 sides, the light rail yard is on our fourth side.

The light rail goes around 2 sides of our property and stops in the middle of it, right at our gondola station.

And then we have construction after that with SJM and MGM.

So all these things are looking very nice for us.

With regard to Las Vegas, we closed the golf course at the end of the year, and we began removing trees and doing the grading for our new convention and meeting space of 450,000 or 460,000 feet that we need very badly now because we're outgrowing some of our shows.

The lagoon begins and are planning for the rest -- and our drawings proceed for the rest of the adjacent property on the west end of our 1600-foot long lake, that is 700 feet or 600 feet wide, 26 acres.

For comparison purposes, for those of you who visualize things in Las Vegas, the water feature in front of Bellagio is 8 acres, at this body of water and its 1 mile long circumferential boardwalk is 3 -- little over 3 times the size of Bellagio and offers tremendous developmental land on the beaches on the boardwalk.

We'll begin on the west side, as we have already, to develop hotels, gaming, restaurants and public attractions.

We have begun that process.

But even as we've finished the drawings and execute the structures, there will be at the east end across the street from the Las Vegas Visitors and Convention Bureau, still another 60 acres, 65 acres undeveloped property with beaches and boardwalk frontage and pinched between our beach and boardwalk and lake, and the Las Vegas 3 million feet of convention Space.

Our new 460,000-foot building is directly opposite the Sands 2-million-odd or may be close to 2 million to 3 million feet for exhibit space.

And so we're all connected.

The folks at the Sands and ourselves are arranging our connections so that between the Sands and the Wynn, we will be talking about almost 20,000 -- 15,000 to 20,000 rooms before we're done with over 6 million feet of exhibit space and hundreds of acres of recreational opportunities and attractions that will be unique, not a theme park or we're not competing with Disney.

We're creating a new kind of experience that is addressed to the modern era taking advantage of technology and all the rest.

Included in that will be the connected 2,000 or 3,000 rooms that will go across the street at what we call West Wynn, the old side of the Frontier Hotel that we bought in December for $336 million.

The previous discussions about Alon, I think that's what it was called, were on 34 acres.

We have 38 because we increased the size of the property by buying the remaining land from [Phil Raffan], the 3.6 or 3.7 acres that were between the Alon side and the Trump Hotel.

So our site is bigger.

It's 1300 feet on The Strip.

It goes from The Strip back to Frank Sinatra Boulevard.

And as we mentioned in the press release, it now takes our total assembly of real estate to 280 acres from Paradise Road to Frank Sinatra Boulevard.

It's almost a mile from east to west.

It's 3,000 feet -- at 3,300 feet and its widest, and it goes down to a little narrower at the other end.

It surrounded by over 6 million feet of exhibit space, 1,000-acre feet of private water rights, and it will add to the over 10 million feet of development that exist today at Wynn and Encore.

That's the big picture, and we're going to attempt in the next 4, 5 months to have renderings that show the entire development of the 280 acres, which incidentally our average cost is just about 2.7 million an acre, and it also includes land across Street to support the primary development in the middle.

And that's pretty much the story of Las Vegas.

The third thing that's probably on my sheet of discussion would be Boston.

We were ahead of 34-month construction contract with Suffolk Construction, John Fisher's company.

His people are among the most talented and collected construction folks we've ever dealt with, I'm happy to report.

And they are on target, a little ahead of schedule, a couple of weeks may be, of course, we got to wait and see how the snow comes, but we are right on target.

I think we're going to top out the building -- the hotel in the next 5 or 6 weeks before the end of February.

And the steel and structure is up for all of the podium buildings, meeting rooms, ballrooms, gambling and all the rest retail and food and beverage.

And we'll open up in May or June, 15 or 16 months from now.

And I think everybody in Boston is excited about it.

The entry threshold was rather high and expensive between our neighboring communities and the obligations imposed by the statute.

Getting up and into construction and getting underway was quite an involved process and took many, many months and a few hundred million dollars.

But once in Boston, it's a wonderful community.

Everybody is very supportive.

The hospitality industry comes together every month.

They support one another.

They've been very -- they reached out to us and are very welcoming as has the governor and city officials and university officials.

I think they're proud to have us there and we're doing it up first class.

Largest private investment in the history of the Commonwealth, and we're going to be the second biggest employer in the Commonwealth behind Mass General Hospital.

That's pretty much it.

All of the guys and gals are here to answer questions, so have at it.

(Operator Instructions) Your first question comes from the line of Joe Greff with JPMorgan.

Steve, you touched on this in your prepared comments referencing the midweek business here in the 1Q.

Obviously, you saw mass volumes improve sequential growth in the fourth quarter, exceeded the growth rate in the 3Q.

Can you just talk about what do you think is driving the improving mass volumes?

Obviously, VIP has been strong for a while, but it seems -- mass seems to be accelerating here.

What do you think is driving that?

Well, again, we're not the Chamber of Commerce or the government.

We are focused on our own stuff.

And I'm going to -- Ian is sitting next to me, I'm happy to say, we're here for design work this week with the whole Macau operation in Las Vegas.

But I'll give you my take on it and then, I think, Ian's is even probably more relevant at the moment.

But look, we took 2.5 years or 3 years to design Wynn Palace.

We took that much time to design Wynn Macau.

And we weren't just sitting around having coffee.

We really grind on little things.

There is -- I have said this in conference call after conference call that God lives in the details in our business.

Our ability to anticipate the nuance concerning the habits and the preferences of our guests to anticipate that both with our buildings and with our training cannot be exaggerated.

The importance of that is critical.

And what happens is our buildings tend to gain momentum over time, which is why Las Vegas had its biggest year in history, $520-odd-million.

It's that in my view.

Now the guy that operates, he is sitting right here.

The market clearly lifted in VIP and significantly in mass.

Wynn Palace was perfectly primed to take advantage of that.

Both our properties are designed for premium mass and VIP in addition to other market segments.

And we were ready and waiting.

When the market lifted, we took a bigger share than everybody else, but our properties deserves that.

If you want to understand what we're doing, all of you that are statistically oriented.

Take a look at market shares before we open a property and market shares after we open a property.

I mean, the Palace hotel snapped up market share.

Gobbled up market share.

We went from 9 to 17 I think that's...

That's right, we're 17%.

Some of the other companies have open places and not experienced anything like that kind of growth.

It's always been the case whether it was Mirage, Golden Nugget, Bellagio, Wynn and Encore in Las Vegas, even Beau Rivage in Mississippi or the Golden Nugget in Atlantic City.

There is a definite pattern.

We deal to a part of the market that tends to lead in good times and not suffer quite as bad in bad times.

And that's one of the reasons why as a company and as a Board of Directors and the management team, we're so dedicated to the sector of the market that we cater to.

Maybe this is more of a technical question for Ian or for Craig.

Can you discuss or remind us why mass hold percentage between Wynn Palace and Wynn Macau is about 500 bps apart?

Is there is a big premium mass mix delta there or some other reason?

And that's all for me.

Well, Joe, as you know, the denominator is a little bit impacted by cage drop in Macau.

So it's really difficult to do an apples-to-apples comparison.

On the mass, it's hard because they use the cage.

It's very different than Las Vegas.

Your next question comes from the line of Carlo Santarelli with Deutsche Bank.

Steve, you talked a lot about some of the development initiatives and the vision for Las Vegas.

Could you comment a little bit, obviously the balance sheet has got meaningfully stronger.

Macau is throwing off significant cash flows and will continue to, could you talk a little bit about how you're thinking about the capital structure at this point and over the next 12 to 18 months?

I think about the capital structure with my Board of Directors constantly.

We love a strong balance sheet, especially at a time when this company is growing as rapidly as it's about to grow.

I think we're going to see Japan in the next 12 or 14 months sort of come into season.

But the development of our own existing properties, we have so much potential that I think the balance sheet strength is a critical subject for continual review.

And we have always been conservative that way.

If I'd been a little less conservative, I would have gone public when Sheldon Adelson did and add more money today, but I have always taken a very sort of, don't let anything really rock the boat approach.

So we're going to continue in that vein.

And it's a subject of constant review among ourselves in operations and on a regular basis with the board.

So that's my attitude towards it.

Fair enough.

That's certainly helpful.

And then just in terms of the time line for, obviously, you stated Boston sometime mid-2019.

With respect to the Las Vegas developments in terms of the Lake and the towers there and then you obviously mentioned the 38 acres across the street.

How are you thinking about the time line for discovery around cost for those projects as well as construction starts and completion?

Here is what I think.

I think that we -- I look for the answer to that question in our history.

We win more money than anybody else in America in a casino, I believe.

And we're profitable.

We've always been the leader in the revenue generated in casino rooms in the city -- in the state since 1989.

Now -- but never at any of my hotels that I've been involved in ever had over -- had as much as 50% gaming revenue.

It's always been more than in non-gaming.

And that as we have grown and got bigger and bigger, the lopsidedness of that ratio has gotten to the 65-35 basis, 60-40, 65-35, non-gaming over gaming.

And I love that because there are 2 factors to that.

A, it's the non-gaming that produces all the fancy gamblers and high income type of patrons.

So what I want to do, because so much of our business evens 35% of it, I want to keep developing the non-gaming aspects of our business.

Remember, hotels are extremely profitable.

That's one of our best operating divisions.

With our room rates, we operate at 50% to 60% margins in the hotels.

And the more hotel rate we get, every dollar goes to the bottom line.

Every additional dollar of hotel revenue is 100% profit, except even the room tax is added on.

So I want to add more rooms.

We have 160,000 rooms in Las Vegas.

Let's get real simple about this.

And the town is occupied about 80-odd-percent.

Now if I add 3,000 rooms, 1,500 or 2,000 of our own right here on the boardwalk and another 2,000 or 2,500 across the street, we go to 8,000-odd rooms out of 170,000.

But I have a right to expect that any weakness in the market will be felt at the older, weaker end of the market, not in the strongest.

My board is going to see a room next week that we built that is going to be the bedroom going forward.

It's 650 square feet, you walk in the middle of the room.

The window is 24 feet wide.

It's 27 feet to the -- from the door to the window.

You walk into foyer that's 6 feet wide.

On your left is a bathroom for the gentlemen with a big shower, a sink, a john and a closet.

On the right of foyer is the ladies bathroom with a shower or a tub, that's a john and sink and a closet.

We have a his and her bathrooms that qualifies as a suite according to Forbes Travel Guide.

You walk straight ahead on your left on the left wall of the 24-foot wide room is the headboard and the bed and the desk.

Straight ahead is the 24-foot window, an enormous window.

And on the right is the sitting area, the living sitting area with a couch and chairs, and 80-inch television set.

Now that's our room.

When you have the best hotel room in Las Vegas, when you're building all suite and give people all suites from $400 a night or $500 a night, you know what our average rates now are creeping up into the mid-threes.

By the time these buildings are done in the next 3 years -- year or so, we'd be getting $400.

There is nowhere in the world you can get a room like that.

And in the town of 160,000 rooms, in the middle of 6 million square feet of convention space and at least 500,000 or 600,000 feet of our own, in terms of ballrooms and meeting rooms at the highest caliber, I'm feeling pretty safe.

And I'm going to get those damn buildings up as fast as I can, because I want to capture more of the absolutely inevitable visitor and tourist traffic that Las Vegas will experience in the next 15 to 20 years.

You have to ask yourself, investment community, do you believe that Las Vegas, Nevada, will for the next decade or 2 continue to be a major destination city in The United States of America and the world.

I think Orlando is 78 million, I think New York is 64, 63, we're 43 and climbing.

If you believe that those 800,000-odd people are going to continue to come here, then you can absolutely be fearless about accommodating these people at the best level and giving the highest level of value.

Anybody who doesn't understand that is missing the boat.

And personally, that's fine with me.

If the stocks low, we buy it.

But that's where it stands.

That's the fundamental thinking of this company.

This is a great city to be in.

It's a great city to develop in.

Naturally, there are competitive issues, and we can always be affected by regulatory irregularities and then unexpected twists and turns by regulators.

But things have been pretty steady here for a long time.

And with the Trump administration, with Republicans in Washington, we are seeing this fabulous renaissance.

This tax bill -- this tax bill with 1-year depreciation on both new and used equipment, the lowering of the corporate rate.

Later this year, as we -- experiences, I'm going to give my employees another raise, a bonus just like all the other companies.

Any attempt to vilify or criticize this tax bill is a fruitless and pointless exercise.

The impact of that tax bill I can tell you is a tsunami of business activity and growth in America.

And remember, who are we out here, we are people that catered businesses and people who have discretionary income.

The Congress and the Trump administration, President Trump, has just given America and companies room to grow, room to run their own lives instead of taking the money and deciding what's best for us in Washington like we had for 8 years.

This whole idea of a tax break, of lowering taxes for corporations and for individuals is the United States government under Republican control with the Trump administration saying, go ahead people, we think you know what to do with your money better than we do.

And I'm not trying to sound like a Republican commercial, although I'm happy to do one.

But I am pointing out that a major recipient of this sort of mentality in the government is Las Vegas, and similarly, conversely, I predicted it and it was true that we were victimized by the wet blanket over-regulatory oppressiveness of the Obama administration.

All of us out here suffered.

We were -- if you're a Republican you were attacked by [Fin Sen], everybody was in our face, and it was affecting our ability to pay our employees and to run our business.

Remember when Obama said, don't be going out to Las Vegas on these junkets, meaning conventions.

Well, everything is changed.

And we're going to ride this with this company at full speed, end of speech.

Your next question comes from the line of Shaun Kelley with Bank of America.

Steve, maybe just to stick with the same kind of same thing on tax reform, but obviously there was a big impact on the company's financials literally to this quarter and some movements on, I think, deferred taxes.

Could you just walk us through at a high-level sort of, what's the impact on go forward kind of cash generation by the business with tax reform for Wynn specifically?

And then what is the sort of reinvestment rate you are considering or thinking about as you think about deploying some of those extra funds?

Matt, why don't you?

Sure.

The valuation allowances is related to some deferred taxes assets that we had on our books, I think.

Most companies in America are going through this exercise right now.

Because as Steve pointed out, tax bill is very beneficial for everyone in the U.S. And that was really the guidance is not clear, but that was where we came out with EY and our accountants and we're going to continue to work through that over the year.

It's very mechanical, Sean.

So very accounting oriented.

No real change in terms of our tax position, our cash tax position.

It will save us some money.

As that will be on a go forward basis as well, generally speaking?

Yes.

Yes.

Great.

And then maybe just to turn back to Macau then, you guys clearly characterized what you're seeing on the mass market side, which sounds exceptional and you're continuing to take share.

Can you just tell us a little bit what you're seeing on the VIP side there was?

I think people are surprised that the mix they saw in Q4 in terms of mass growth accelerating and VIP decelerating, are you seeing that in your business and what are your junket partners telling you right now?

The junkets remain strong for us.

The market gyrates constantly and people get nervous with a bad week.

The junkets are talking very positively going forward.

There is a lot of anecdotal happiness about Chinese New Year around the corner.

There is a lot of money coming in.

So we're looking forward to continuing strong business in the junkets and VIP and on premium mass and mass in general.

And as we continue to modify Wynn Macau and Wynn Palace, we'll continue to capture more and more of the market.

I think one of the really modern absurdities is the people that wait to see what the monthly number is from the [DGIC] and then immediately start play in the stocks as if they were in a casino themselves.

If I can do anything constructive, I'm going to say, if anybody's interested in vesting the gaming industry, do not, do not, I repeat, bet against Macau.

You will be losing your money.

(Operator Instructions) Your next question comes from the line of David Katz with Jefferies.

I wanted to ask about the Palace in relation to Wynn Macau.

And I recall, I guess, it was nearly 2 years ago, you laid out some potential scenarios where the Palace could reach a level, a certain level of EBITDA and I believe the number was about [630]?

Can you talk about what has changed structurally within the market or the property that we can measure against that number today?

And in particular, when I look at the Wynn Macau and the margin level that it's achieving, there is still a reasonably wide differential between what the Wynn Macau is doing and the Palace?

And is the Palace built and structured to achieve the same kind of margin level that Wynn Macau is over time?

Yes.

So we've answered this on the last call, but over time, we hope to get Wynn Palace to the margin levels of Wynn Macau, but what people have forgotten about very quickly is in the fall of 2016, we transferred 1,500 people from Wynn Macau to Wynn Palace.

And we had a once-in-a-lifetime business opportunity to downsize without affecting the quality of the product or the service.

And that helped the margins of Wynn Macau substantially 2 to 2.5 points.

And eventually, Wynn Palace will build efficiency, but that's not the focus right now.

The focus is on supreme guest service and experience as customers try our property.

That's what we're known for.

Efficiencies come later.

We're driving quality right now.

But you mentioned that we -- one stop, we could make $630 million at the Palace.

Did I understand you correctly, sir?

Yes, yes.

We'll blow right through that.

Okay.

And if I may ask one follow-up?

One of the questions that investors raised with us and I realize it's -- it may not be easy to answer in this forum and it may be off in the future is that there are concessions that technically expire at some point in time.

Is there anything that you can share with us or tell us to help us think about in the context that we do have high confidence in Macau and the regulatory structures around it, is there anything that you can tell us and how we should think about answering that question when it comes up about concessions expiring in 2022 and in other people's cases sooner than that?

Well, first of all, there is going to be specific guidance according to announcements, comments made by the government -- the Chief Executive in his testimony before the legislature.

In calendar year '18, there will be specific guidance because one of the concessionaires expires in '20, at least on paper.

However, on a larger sense, we enjoy a good deal of confidence, and we have been given reason to have confidence that our businesses will continue after the initial concession expiration dates.

That confidence is based upon the kinds of conversations we have with the government.

But on even a larger sense, this very situation was faced by the other special administrative region, Hong Kong.

I'll remind everybody that the status of Hong Kong and Macau in the Chinese firmament is that each of those cities is a special administrative region abbreviated to SAR.

And in the SAR at Hong Kong, the same situation existed much earlier than it did in Macau.

The turnover took place, leases on buildings and properties expired and the central government seamlessly extended those things and accommodated a stable, stable commercial environment in Hong Kong and has done so in the transition of Macau.

The only thing that the central government of Beijing did with the transition from Portuguese Macau to its current status was to buttress and support that city and its fundamental business and roots in any way possible.

The prosperity of Macau post the Chinese takeover in '99 and the pre-Mainland Chinese concession period is stark.

What China stands for is stability.

They don't like to disrupt things.

They do like foreign investment.

When we first came, I was invited to the capital to (inaudible) where the center of power is in Beijing.

And at that time, the vice premier invited my wife and I as part of their protocol to welcome foreign investment.

The atmosphere in China has not changed.

And Macau, we are so stitched into that community with our employees and our company that we feel comfortable in the situation.

But on the other hand, we do not speak for the government nor can we affirmatively anticipate what they may do.

But like anything else, judge people by their past performance.

Human beings tend to have an element of consistency to their behavior.

And on that basis, we're pretty relaxed about our future and spend our time, and I have encouraged as recently as last few months in meetings with the government to proceed with planning of our phase 2 expansions.

I know that Mr. Adelson feels the same way I do, because I have this conversation with Sheldon frequently.

We talk about matters in Macau with MGM and with the Sands on a regular basis.

And I think all 3 of us feel the same way.

Jim Murren, Sheldon himself.

I know Rob Goldstein shares our feeling on that.

How about you and Ian?

Absolutely, yes.

I mean, you want to be really candid about this.

We don't want to hold any information that we don't have.

We want to share.

I know how important this question is to everybody, and it should be.

And Craig, any of us want to -- is Linda on the call?

No.

She's actually flying out here.

Oh, she is on her way here?

Well, anyway, the boss is here.

Is Karen here?

Karen is not here.

Just myself and Frederick.

Okay, so I got Frederick and you.

Matt, Craig and I.

That's the latest and the deepest response we can give you.

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

I want to follow up on your comments about developing the 38 acres in Vegas.

You mentioned, wanting to be open as soon as possible to capture the growth there, but you also referred to it taking 2 to 3 years of design for the properties in Macau.

So I guess, just wondering if you could put any rough time frame on design and any sort of preliminary thoughts about budget.

Sure, Robin.

First of all, with regard to the area known as the golf course land.

DeRuyter Butler and Roger Thomas and the rest of his -- and operations have been involved with the design of the golf course for over 2 years already.

And that led to our satisfaction and the beginning of construction.

I have already started the analysis and the planning of the property across the street.

And -- the West Wynn property.

And I'm here for continuing design conversations on Macau and our adjacent 11 acre developments.

Sometimes things move faster than others.

One of the really great things about the property, the West Wynn property, Wynn West, whatever is across street, I'm not going to call the Frontier anymore.

And I'm certainly not going to call it Alon that was an important project.

I'm going to say this, when you are adding to the existing 10 million feet of Wynn, you get a tremendous opportunity to piggyback many of the things that are already built because it's only a 100 feet across the street.

We are going to connect with an air-conditioned umbilical hallway.

We built the acceptance ramp, the platform and the escalators for that on our side of the street when we built the beach club, there is escalators and a big acceptance platform between Wynn and Encore, where we're going to connect to the property across the street.

I always held the conviction that we'd end up with it.

So I built the place to connect, when I built the beach club.

It's there already.

And so what we're going to do across the street is going to go rather quickly, because I have been giving a thought for a long time and sketching with it.

And so I don't think that the design development period is going to be very long on the Wynn West property.

And the design process, the creative design process on this eastern development on the golf course has been 2 years in process.

A lot of thought.

Tremendous modeling.

There were so many options on the golf course because of our water rights.

So many possibilities.

We exhausted all of them, especially with an eye to how we could monetize everything.

Make sure that made a lot of money for us.

Budgets, I think that was the last part.

We have budgeted our building that's currently -- that we're doing the grading for now, our convention and meeting building that was, Matt, was it 460,000, 480,000 feet?

460,000 feet.

460,000 square feet of ballrooms, meeting rooms and convention and catering offices and that sort of thing.

And our budget.

And we got prices on it and we know where we stand on that.

As the final budget on the lagoon is awaiting, we just finished giving a final short plan, meaning the shape and the nuance of the in and the outs, the exact final frozen shoreline shape to the people at Crystal Lagoons.

When their drawing comes back, we've got a pretty clear idea what is going to cost.

We will have a specific bid from our contractor for that.

So as each phase of the development proceeds, we wait till we get complete working drawings.

We bid the working drawings.

And when we're satisfied with them, we start construction.

And we don't start construction until we have a firm price based upon technical drawings of at least 80%.

Robin, if you're asking me, I think your question is specific in general, we won't start any job until we have a final price based upon technical drawings.

On the other hand, you're wondering if I got any idea what it's going to cost?

Am I reading it right?

Just a ballpark, yes.

Well, Matt, what's our current budget on the convention building about?

About $350 million, just for the convention building.

Yes.

And we think the lagoon is going to be somewhere between $40 million and $50 million.

And that's an outside number.

Yes.

The 1,500 rooms, casino and the 5 restaurants in -- I think of the place back here is an oasis, Paradise Park is sort of an oasis.

That tower, we're not ready.

We haven't finished final -- we haven't given our building estimators and all that stuff for preliminary budgeting.

We haven't given that number yet.

The high-rise, we got a pretty good idea.

I might have described through earlier in the conversation.

Every single room in that hotel is a suite.

They are all exactly alike, be that 1 bedroom and 2 bedrooms attached to them, connected.

There are some villas on the podium roof, but basically, the whole hotel is a suite hotel.

I don't think that I'm going to estimate that job yet.

When we get into that, we're going to show everybody a drawing of everything.

Elevations, from the west side of the street to Paradise Road.

We're going to show everybody exactly how this little city works.

This tremendous development opportunity that existed on the Desert Inn property.

We saw it in 2000.

We said we could be developing this for the next 20 years, and that's exactly what's going to happen.

And it has more potential and opportunity than any other piece of property did in Las Vegas.

We develop the west side of The Strip, all those hotels.

I think, at one point, we've done everything, but Caesars between Spring Mountain Road and Tropicana.

But that piece of property from The Strip going west to I-15 to Frank Sinatra Boulevard is 2,000 feet deep.

On the east side of The Strip, where the Sands and the Desert Inn are, the distance from The Strip to Paradise Road is over 3,000 feet.

And it's not backed up by a superhighway with no access, really accepted interchanges, it's backed up by the Las Vegas Visitors Convention Bureau and a major Street Paradise Road that is a straight shot into the door of the airport, which is a mile or 2 away.

So the east side of The Strip has always been the most desirable side.

It's why incidentally in the '50s, virtually every hotel was built on the east side of The Strip, not the west.

It wasn't too much later when the Stardust, which came later, the Dunes and then finally, Caesars and the Last Frontier, but all of the original hotels from the Sahara to the Thunderbird to the Riviera to the Desert Inn to the Sands, everything was built on this side of the street because the property is so much deeper and has better access on all sides.

Yes, I mean, I'm being pretty enthusiastic today about Las Vegas, but this is probably the first conference call we've had when our whole development ambitions have finally matured.

We've kept ourselves sort of low key because we wanted to get the other side of The Strip.

Now that we've completed our assembly, I'm excited and really having a good time sharing it with everybody, and we'll be doing a lot of that in the next few months.

That's great.

Maybe just one other question.

I don't know if the tax law changes have made you think about repatriating some cash back from Macau to the U.S. Is that something that would finance some of this development?

Or do you feel like you need to leave cash in Macau because there might be a large payment to be made to renew the concession?

I guess, how does -- how do the recent tax law changes make your think about that cash and whether you bring it back to the U.S.?

Robin, we -- if you look at the footnote on our financial statement, we have always been able to bring our money back because we were in an unusual position.

The only tax in Macau is an income tax based upon our gaming revenue.

So we were able to get tax credit for that because we were paying the tax abroad.

We got some shelter here in America.

So we keep money in China to support Chinese operations, but we keep most of our money, $2.5 billion or so Matt?

Yes.

Around at the moment, around here.

So we don't have a repatriation problem.

We were rather unusual and unique company because our only tax we paid abroad was income tax.

And all American companies have always got the credit for income tax paid abroad.

So we didn't accumulate enormous money abroad as some of the bigger companies have done.

Mike, do you want to add anything to that?

No, I would just add, Robin, as a general rule, we tend not to keep a bunch of excess cash at any of our operating subsidiaries in Las Vegas or the properties in Macau either.

So we patriate that and we would anticipate continuing to do so.

Your final question comes from the line for Harry Curtis with Nomura.

A quick follow-up on Macau.

Steve, your comments about developing the 11 acres.

Any initial thoughts on the interactions between you and the government on the mix between gaming, non-gaming?

And what are you trying to accomplish there?

That's a really good question.

I love it.

As Ian said, we focus on a certain part of the market, and we love the niche that we occupy.

We are comfortable we have had decades of experience there.

The property on the south side of our development sits in full view of MGM and SJM.

They look down on it.

Our water feature and Lake are in the middle.

And there is this big piece of property on the south side.

It is my intention, with the approval and cooperation of my colleagues, and when I say it's my intention, this is a position I have come to at the urging of my colleagues.

It did not initiate with me.

But we have decided that we want to create a structure, and this is a non-gaming structure primarily, where every condition in the building, and we're not talking about a lot of rooms, we're talking about relatively few on the grand scale of things, a few hundred.

Every room is special with terraces, courtyards, balconies, experiences from a guest point of view that are fantasy-like.

We are taking the position that if we ask people to journey to us and forgo our neighbors that we have to give them a very powerful reason to do so.

So we intend to plant this low-slung building of 5 or 6 stories or something like that, and that could change by 1 or 2. We intend to plant this building.

I think MGM in Las Vegas and I guess, in Macau, they -- years ago, they come up with the idea of the mansion.

It was a very lovely building in Las Vegas with an atrium and 20-odd rooms.

And it's been very successful for them, and I know they're going to use that in Macau as well.

We are taking that idea of a fantasy-like enclave of special rooms with accompanying food and beverage facilities that are experiential in a way that has not yet been tried in the hospitality business in the world.

That's pretty puffy language.

And ordinarily you'd discount most of it, but maybe if you consider the source of this company, we have a track record of trying things like that and pulling it off.

And I assure you that we know exactly where we're going.

And we think that the only place on world -- in the world so perfectly suited for this is Macau.

Perfectly suited, an opportunity of a lifetime to create an enclave.

I'm sure there will be some gambling in it.

Rooms for people to play.

You know the market, the gaming capacity of the hotels is allowed to grow at a compound rate of 3%...

Yes, I mean, it seems sort of a tight squeeze when we all opened up a few years ago.

But that pressure is off because when SJM and MGM opened, that's pretty much the story.

The normal increase in the growth of the tables will allow us to have much equipment as we need.

Remember I also told you '16 that we had enough equipment to make the money we needed.

You see our business doesn't depend on thousands of tables.

Our business depends on the quality of our guests.

And we're going to use our real estate to show some people some new moves.

And the idea of doing something like that is really exciting for us.

It turns us on.

And that's why everybody is here.

Just as a quick follow-up.

Are you getting initial inputs from the government?

Any guidance on what they'd like to see as well?

Sure.

They are interested in broadening the invitation of the whole city, number one.

And number two, they are interested in having the highest possible amount of advancement for local citizens within the hospitality industry.

And I would say probably the second thing I mentioned may even eclipse or trump the first, the idea that the local population benefits both in carrier opportunity as well as money and living standard is a recurrent theme there, which we have recognized.

We're the only company where every single company of ours is a shareholder of 1,000 shares at least.

So when we say that we're going to build new hospitality accommodations that are really one-offs in the world, that appeals to them, oh, Macau will have something that no other city has.

And that's really the grove that I love being in and the gang that I'm hanging with, we all love that.

I mean, Ian can speak for himself, but...

I'm fully behind that.

Remember, we recruited the Senior President of our operations in China from the Peninsula Hotel.

I mean, that's a tip off right there.

We didn't go looking at Motel 6 a long time ago.

I mean, when we look for a guy that we could take, a man already in senior leadership.

I mean, if you're the General Manager of the Peninsula in Hong Kong, even if you went to Cornell or Northwest or UNLV hotel school, and you have worked for Ritz-Carlton,

Mandarin Oriental, Four Seasons, Peninsula, if you work for any of those highline hospitality companies, when all those kinds of dudes get together, whoever is the GM of the Peninsula in Hong Kong is sort of the guy whose ring they kiss, I mean, that's like big status among that fraternity.

And Ian had opened -- had been the Resident Manager.

And then when Peninsula in Bangkok needed first aided, they sent him there and it became a big hit.

When he came back, he was the GM of Peninsula, that's a long time ago.

Resort gaming business now.

That's what we're, so the local government likes us doing this kind of....

Thank you, everyone.

That's the end of the conference call today.

This does conclude today's conference.

We thank you for your participation, and also that you please disconnect your lines.