Las Vegas Sands (LVS) Chairman and CEO Sheldon Adelson once pledged to spend US$10 billion to develop an integrated resort in Japan. On Thursday, LVS described US$10 billion as just the starting point for a Japan IR – admitting in the process that soaring capex expectations were casting some doubt on the potential to achieve necessary returns.
The comments were made by LVS President and Chief Operating Officer Rob Goldstein when asked to discuss likely Japan investment levels during the company’s 3Q19 earnings call on Thursday.
Quoting a figure of US$12 billion as a genuine possibility, Goldstein noted that, “No matter how good you are at this business, that must give you pause to stop and think, ‘Is that prudent? Can you really deploy, can you get the return?’
“We’ve had those discussions and we’ve had them with the Japanese government. We have the balance sheet and the capability and the skill set to do it. The question is, can we get a return that the guy to my left (Adelson) is going to endorse?
“We’re working through those issues right now but I think US$10 billion is the starting point. I don’t think anybody’s going to do it for less than US$10 billion, unless you’re going to do something sub-par.”
In August, LVS became the first company to officially withdraw from the race for an Osaka IR and declare its intention to focus on Tokyo and Yokohama instead – two cities with much larger population bases than Osaka and easier access for tourists.
And while the company noted that operators looking to spend less than US$10 billion could so by targeting regional locations instead, Goldstein made it clear that LVS is “not in that business.
“We’re not going to Hokkaido, we’re going to be in a top tier city which would mandate US$10 billion – and that may be light. I mean, the cost of building in Japan is a big issue and the way the deals are structured, it’s a challenge.
“We’re used to writing big checks, but all that money on one IR does make you stop and pinch yourself and ask whether you can get the returns that your shareholders deserve.
“Japan will take a little more thought process. We’re starting, we’re not writing it off, we’re deep into it and we’d like to be there, but we’ve got to make sure, at the end of the day, that it’s prudent.
“It’s going to be a big number to make it work.”
