In the event of any closures of Macau satellite casinos, the valuation of a hotel tied to such a venue could decline by over “60 percent” at the top end of the impact range, and affect the debt and credit position of the investor concerned. That is according to Franco Liu, managing director of real estate service provider Savills (Macau) Ltd, in an interview with local Chinese-language newspaper Macao Daily News published on Thursday.
The Savills Macau senior executive shared his company’s projections with the media outlet on the basis of a worst-case scenario. That was the potential discontinuing of a satellite’s casino operations, and the impact of such an event on the commercial activity surrounding the relevant gaming venue.
Macau currently has 11 satellite casinos that continue to operate under the 10-year gaming concessions that started in January 2023. Nine of those 11 satellite casinos are under SJM Holdings Ltd’s licence; one is under Galaxy Entertainment Group Ltd’s permit; and one is under Melco Resorts & Entertainment Ltd’s gaming rights.
Nonetheless under the revamped gaming regulatory framework – coinciding with the current concessions of the six Macau operators – from 2026, the third-party investors in satellite casinos will only be permitted to earn a “management fee” via a “management company”. They will not be allowed to take part in other traditional business practices for the satellite sector, such as having a share of gaming revenue. A three-year grace period from 2023 until the end of this year, currently permits the latter system to persist.
The lack of any publicly-declared “concrete solutions” on how satellite casinos can sustain their operations beyond the grace period, has potential to cause difficulties for banks and surveyors in assessing the fair value post-grace period, of the relevant real estate site, reported Macao Daily News, paraphrasing Mr Liu.
The Savills representative said that in the past, the fact that a Macau satellite investor had access to casino operations business, had had a positive impact on the amount such investors had been able to borrow from banks. Without the support of the casino business, some could see any bank loans they currently hold, exceed the valuation of the relevant property, and thus affect negatively their leverage.
Savills Macau estimates that the combined amount of loans carried by Macau satellite casinos and nearby commercial properties that rely on their foot traffic, is in the range of HKD25 billion (US$3.2 billion) to HKD39 billion, Mr Liu also mentioned.
His real estate service has also estimated there is a 13,500-strong workforce currently employed in gaming and hotel services presently associated with the 11 satellite casinos, and in nearby shops and other businesses.
Several Macau legislators have raised concerns about the possibility of a surge in unemployment among locals, and a negative impact on nearby shops and businesses, if there were widespread closures among Macau’s existing satellite casinos at the end of this year.
Macau’s casino regulator, the Gaming Inspection and Coordination Bureau (DICJ), has pledged “continuous assessment” of the operating environment of the city’s gaming industry, and to keep in “close communication” with the sector and other government departments.
That was in order to “respond to any condition that could affect the good operation of the gaming industry and social stability”, said the bureau’s acting director, Lio Chi Chong. His comments were in a written response to an enquiry about the future of the satellites, filed by Macau legislator Nick Lei Leong Wong.
In the response – dated February 28 and made public this week – the DICJ acting director also mentioned that the Labour Affairs Bureau would monitor the labour rights of the workers in the relevant businesses, and provide any necessary support on employment-related matters.
