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Las Vegas Sands Corporation (LVS)

Q3 2006 Earnings Call

November 1, 2006 4:30 pm ET

Executives

Bill Weidner - President and COO

Sheldon Adelson - Chairman

Brad Stone - Executive VP

Rob Goldstein - VP of Venetian

Scott Henry - Senior VP

Bob Rozek - CFO

Dan Briggs - VP of IR

Analysts

Larry Klatzkin - Jefferies & Company

Bill Lerner - Deutsche Bank

Celeste Brown - Morgan Stanley

Robin Farley - UBS

Rishi Parekh

Steve Kent - Goldman Sachs

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2006 Las Vegas Sands Corporation Earnings Call. My name is James and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct the question-and-answer session toward the end of this conference. (Operator Instructions) As a reminder, this conference is being recorded for reply purposes.

I would now like to turn the call over to Mr. Bill Weidner, President and Chief Operating Officer please proceed.

Bill Weidner

Thank you, James. Good afternoon, everyone, and thank you all for joining us here today. With me in Las Vegas are Mr. Sheldon Adelson, our Chairman; Brad Stone, Executive Vice President; Rob Goldstein, the Vice President of the Venetian here in Las Vegas; Scott Henry, our Senior Vice President; Bob Rozek, our Chief Financial Officer; and Dan Briggs, our VP of Investor Relations.

Before we begin today, I do need to remind you that today's conference call contains forward-looking statements that we are making under the Safe Harbor provisions of Federal securities laws. I would also like to caution you that the company's actual results could differ materially from the anticipated results in these forward-looking statements. Please see today's press release under the caption 'Forward-Looking Statements' for the discussion of risks that may affect our results.

In addition, we may discuss adjusted EBITDA, adjusted net income, adjusted EPS and adjusted property EBITDAR, which are non-GAAP measures. Definition and reconciliation of these measures to the most directly comparable GAAP financial measure is included in the press release, which is posted on our website. Please note that this presentation is being recorded.

By now you should all have received our press release detailing our financial results for the quarter. The results and the release confirm that we continue to execute our operating and development strategies, both in Asia and in Las Vegas. In Macao, the Sands delivered another record quarter, with our visitation and operating metrics continuing to reflect the incremental growth, even has expensive additional capacity was added to the marketplace.

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

Before we address our quarterly results and move on to your questions, I want to spend the few more moments in our perspective of the most important takeaways from the evolving marketplace in Macao. First, the supply driven market scenario is clearly in evidence. Gaming capacity is now being added at significant rates and the market continues to expand and response to those increases in capacity, with the mass market in particular continuing to expand a healthy double digit rates.

Second, the best products in the marketplace, those that effectively address the market opportunity are all performing inferior to us. The results of the Sands Macao today clearly support that view. In a period when substantial amounts of new products have been added to the marketplace, our revenues and EBITDAR at the Sands have continued to expand.

While our market share has remained steady for the table games at over 20%, and continued to be very strong for slot machines, where we recurrently capture 30% of the market. Our extensive coast side development plans are based on these two fundamental concepts; that the market will expand as quality product is introduced; that the highest quality products in the marketplace will not only win market share from the inferior product, but will also expand the market to a new set of customers, a set of customers that either don’t visit Macao all the day or visit Macao only infrequently.

Although Sands will remain a formidable property on the peninsula, our principal focus going forward will increasingly turn toward our development side, Cotai. We believe that the elasticity of demand reflected in today's evolving Macao marketplace will receive a significant boost when the market's first truly integrated destination resort, The Venetian Macao, opens the doors for business in the Cotai Strip in less than nine months.

We remain unwavering in our fundamental strategy, build the heart of the Las Vegas strip with multi-branded destination resorts all connected by air-conditioned walkover bridges on the door step on China. We are now under construction of undertaking preconstruction activities on all seven sites on our Cotai Strip, grading Asia's premier convention, vacation and leisure destination.

Turning to our operating highlights for the quarter, third quarter adjusted property EBITDAR came in a 202.6 million, to nearly 29% increase over the third quarter of 2005. Third quarter adjusted EBITDAR for the Sands Macao came in at all time record of a 127.4 million, that's an increase of over 41% versus third quarter of 2005. Third quarter occupancy at the Venetian Las Vegas was a third quarter record of 98.4% and third quarter REVPAR was also a third quarter record of $217 per room, up 11.3%; ADR was actually $221.

We advanced on a number of targeted capital improvements at our operations, both in Las Vegas and Macao, strengthening our long-term strategic positioning. We made further progress on the lease-up of our retail malls on Cotai and advanced negotiation with additional trade show meeting organizers to host additional conventions, exhibition and corporate meeting events at the Venetian Macao.

We executed our development agreement with the Singapore Tourism Board for the Marina Bay Sands at Singapore, and completed $1.4 billon credit facility to fund our land concession payment and development activities. And finally, we continued our ongoing efforts to secure additional development opportunities to supplement our growth pipeline around the globe.

So, those are the highlights. Now let's turn to our detailed quarterly results. In Las Vegas, both revenue and EBITDAR was stronger as our convention-based strategy grow revenue increases in our hotel, convention and food and beverage businesses. Casino revenues were actually down compared to one year ago, reflecting a decrease in high-end play versus the year ago period.

Table hold of 23.4% came in above our expected range of 20% to 22%, or below last year's third quarter hold of 23.9%. Las Vegas EBITDAR came at just over 75 million, up 12.5 % compared to the same quarter last year. These results reflect the strength of our convention-based strategy, driving double digit increases in EBITDAR despite an anomalous decrease in high-end play.

Our meeting facilities provide us with greater capacity to book group business, which contributed to a record third quarter occupancy in REVPAR and a strong food and beverage performance. If group catering revenues are added to room revenues and divided by the available rooms, the rooms and catering REVPAR grew from $218 in the third quarter of 2005 to another third quarter record of $266 in the third quarter of 2006, an increase of over 22%.

Our convention-based business model is performing well, and we look forward to extending that strategy and harnessing the full power of our Las Vegas master plan with the opening of the Palazzo in the third quarter of 2007. At the Venetian we made progress improving the yield from our expanded convention space and entertainment offerings. As these assets continue to ramp, we expect to see additional progress, but do not expect to realize the full impact of these enhancements until the opening of the Palazzo in 2007.

Other components of our Las Vegas capital improvements strategy include a third theater, a 700-seater that opened just last week; and in terms of room products we have started with the renovation program of all of our suite rooms -- all of all our suite rooms in the Venetian tower. This renovation will update, improve and contemporize our Venetian rooms, while minimizing destruction to our business and is gradually completed by the time the Palazzo opens next year.

Construction of the Palazzo next door remains on track for a fall 2007 opening. Our retail leasing activity in the Palazzo mall, which will be anchored by Barney’s New York, continued to progress with approximately 80% of the space now under release are in agreement on commercial terms. Anticipated in the leasing of the remainder of the space to completed -- to be completed by its spring 2007.

Turning now to our performance and activities in Asia. The Sands Macao turned in another record quarter, generating an all-time adjusted EBITDAR of 127.4 million, up over 41% from the quarter one year ago. We maintain -- we remain pleased with our performance across the board in our casino business, the mass market, the VIP market and the slots business. As I mentioned at the beginning of my comments, despite of more doubling our capacity in the marketplace, we have been able to maintain our share of table game market in Macao.

In addition, our podium expansion was opened in late August, will now allow us to specifically target the market to an additional segment of the mass market or the mass table market with the $100 Hong Kong, which is approximately 1250 average bet baccarat player being the primary target of these new tables. The expansion will also provide incremental capacity to our weekends, holidays and any of other period of strong high mass market demand.

During the last quarter, our mass table drop was 11.3 million per day in the quarter, that's up modestly from 11.1 million per day in the third quarter of 2005. Slot handle grew 39%, reaching $265 million, producing a win per unit per day of $245 cost -- across the 934 slot units on board, versus $218 across 802 units of slots in the quarter one year ago. That's a 12.4% increase in slot machine win per unit, despite a 16.5% increase in capacity of the Sands and an increase of over 63% in the Macao market as a whole, a further evidence of that supply driven demand I talked about earlier.

On the VIP market side, rolling volume came in at 3.5 billion in quarter three, compared with 3.2 billion in third quarter of 2005. We remain extremely pleased with our VIP business, which experienced unusually high hold percentage during the quarter. This unusually high hold percentage actually served to depress the quarter's rolling chip volume. I will talk more about this relationship between hold percentage and rolling chip volume later-on on the call.

We continue to bring on board additional VIP players, our indoor high-end network and we will continue to focus our pies of marketing activates in Asia to directly support Macao and indirectly support our activities here in Las Vegas.

Our strategy for growth and expansion in Macao remains clear. At the Sands Macao, our podium expansion is now complete. The final phase of the expansion added over 250 mass tables and nearly 300 slot machines to our capacity. As this new capacity begins to ramp, we will focus on serving the lower end of the mass market, the $100 Hong Kong baccarat player, with more table capacity and expanded Asian fast food offers. We will also begin to -- begin direct advertising and other marketing programs targeted at this profitable and rapidly expanding segment of the marketplace.

On the VIP side of the Sands, we continue to recruit new players with our pies of club offerings, to better serve this business segment and to match complementary room product to increase VIP capacity or adding an additional 240 rooms. Those rooms are in the pies of suite category to our current inventory of approximately 50 suites at the Sands. Construction has already commenced on the 39-floor tower, which is expected to cost approximately 100 million and expected to be completed in the late summer of 2007.

On Cotai, construction of the Venetian Macao which will anchor the Cotai Strip, remains on schedule for summer 2007 opening. The building is now topped off and we expect construction to be substantially completed by April 1st. On the remainder of the Cotai Strip, we are continuing to make significant profits. As we have previously announced, we have entered into non-binding letters of intent with Four Seasons, Hilton, Conrad, Starwood Sheraton and St. Regis brand, Fairmont Holdings Raffles International with Fairmont and Raffles brand, and we expect to sign definitive agreements shortly. We've already signed definitive agreements with Shangri-La, covering the Shangri-La and Traders brands.

Given the tremendous interest in booking demand we are seeing in the convention and corporate meeting side of our business, as well as from the Chinese and other Asian tour operators, we've decided to move certain portions of our Cotai development forward, specifically two 1,500-room hotel towers that were originally envisioned to be added in today's two of the strip are now being planed into phase one of our developments. One of the towers will be on site 5, the other tower will be on site 6. This modification will enable us to provide the additional hotel product required to stage larger exhibition and tradeshows in our convention facilities and to meet the demand that we see developing from tour operators. We have also significantly expanded our meeting facilities that we plan to build on sites 5, 6, 7, 8and on 3, on the Cotai Strip to tailor these developments to the potentials that we see in the marketplace.

Our pipeline of prospects for larger events, events that require significant blocks of hotel inventory in 2007 and beyond continues to grow. And we are now entering into the booking window for 2007 corporate meetings, meetings that can be accommodated with the portion of the 3,000 hotel rooms, which will be made available on the opening of the Venetian. We expect to announce some significant additional signings on both, the corporate event and tradeshow pieces of the business very shortly.

On the retail side, we continue to make steady progress on the leasing of the malls on the Cotai Strip. At the date of our last conference call, we announced that we have reached commercial terms with more than 315 premium retailers for 699,000 square feet of retail space. That represented nearly 60% of the approximately 1.2 million square feet available space in our Grand Canal shops and the adjoining mall at the Four Seasons in Macao.

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

We are moving ahead with definitive leasing documents now, and have executed documentation with a number of them. We've also begun the leasing process for now for sites 5 and 6, given that we are now effectively sold out on the main level of our Grand Canal shops in the Venetian. Sites 7 and 8 and three will follow thereafter. These additional Cotai developments will add another 2 million square feet of retail space.

Turning to entertainment offerings on the Cotai Strip, we have advanced our plans with Cirque Du Soleil to create a permanent home, the first in Asia; and our 1,800 seats Cirque Du Soleil at the Venetian Macao on the Cotai Strip. And we continue to pursue other world-class entertainment talent to appeal specifically to our mainland Chinese, Hong Kong and Pan Asian customer base in Macao.

We have made dramatic progress in our Hengqin Island development plans. The [Guansao] and Zhuhai governments have now authorized me to make the following statement, and I quote. "All major departments of the Guangdong government have had a meeting regarding the approval of the master plan of Hengqin Economic Cooperation Zone or the Pan-Pearl River Delta. The master plan is expected to be approved and executed by Guangdong government within one month according PRC regulations.

The conclusion of the meeting include that the Venetian Resort project will become the first resort project to be invested on Hengqin Island or the Peoples Republic of China. The project includes MICE tourism, holiday resort and time share units. The total proposed project area by the Venetian is about 8 square kilometers. The approval process has reached the final stage and expect to be finalized by the end of this year."

Several news outlets in Macao in the mainland have confirmed these sentence.

Now that the approval process is in its final stages, it makes sense for us to reiterate our vision for what Hengqin Island development plan does for our overall development plans in Macao and in the PRC. But our Hengqin Island plans are combined with our developments on Cotai, we will clearly be building the largest integrated destination resort in Asia which will cater to both business and leisure travelers that will encompass world class exhibition and conference facilitates, live entertainment, shopping, fine dining, yachting, golf, tennis, water sports, gaming and other activities. And most importantly, give us a mainland China address to promote to the 1.3 billion annual visitor Chinese domestic travel market and over 60 million delegate meeting and convention market. This combined mega destination will target business and leisure travelers, not only from the Pan-Pearl River Delta in China, but also from Japan and South Korea, North Asia -- in north Asia as well as south and southeast Asia.

To further these efforts, we are developing a strategic business partnership with key travel agencies and travel distribution channels in each country to create, promote and distribute tourism programs and packages to our fully integrated resort. The packages and programs are designed to appeal to leisure travelers, honeymooners, family vacationers, gourmet diners and those who enjoy shopping, live entertainment and a relaxing spa experience.

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

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

Additionally, last Friday we organized the China Tourism Forum at the great Hall of the People in Beijing to promote our new destination. The guest and attendants included senior government officials from the central government of People’s Republic of China, the Beijing Municipal Government, leaders of the China National Tourism Administration, the Beijing Municipal Tourism Bureau, and senior executives from China exhibitions group and the China Council for the Promotional of International Trade. In addition, representatives from national and regional broadcast, print and online media attended the forum. The response and support we received from the forum delegates was nothing short of tremendous.

While it is clear that we've made a breakthrough in furthering our Hengqin Island development plan, much remains to be finalized as we move forward. And the central government control policy approvals, like border crossing, offshore currency trading, preferential taxations and such, have yet to be finalized. Our Hengqin and related Changxing Island development plans continue to be subject to receipt of the last of the necessary government approval.

Before leaving our discussion of Hengqin Island and the Cotai Strip, I wanted to summarize where we are and we expect to be from an investment and a staging perspective. For the Cotai Strip, given our expanded gaming and meeting facilities at each of the sites 5, 6, 7, 8 to 3, as well as the additional hotel tower which will now be built on each of these sites, we expect to spend between $9 and $11 billion, inclusive of land premiums and the expanded hotel room meeting and gaming facilities.

The Venetian Macau and Four Seasons, which have not changed significantly in scope, will represent approximately 3.5 billion of that $9 to $11 billion total. With respect to staging, we expect the Venetian to be open in the summer of 2007, Four Seasons to be completed about six months thereafter. We now expect sites 5 and 6 to open in mid-2008; and sites 7, 8 and 3 to open in the latter half of 2009.

For Hengqin Island, we expect to invest approximately 400 million in the first 18 months of our initial phase. Although we could potential invest as much as 2 billion in the next five years, and as much as 10 billion or more over the next decade. As we mentioned before, we expect that much of our Hengqin Island investment will be financed by the sale of vacation suite property as we move along and it's developed.

Turning to development of Marina Bay Sands in Singapore now, during the third quarter we signed our development agreement with the Singapore Tourism Board, and completed the land related payments call [under] the agreement. Our preliminary leasing and preconstruction site preparation activities continue to progress. We expect to work -- we expect to begin the work on foundation systems early next year.

In terms of other Asian development opportunities, we are continuing to pursue many promising opportunities. Japan, in particular, could potentially represent a tremendous opportunity for us. We continue to interface with the authorities there, as they consider proposed legislation that could over time enable the economic benefits of convention driven integrated resorts to be brought to Japan.

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

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

On the domestic front, we continue to advance our proposed development of 126-acre Bethlehem Steel Works site in downtown Bethlehem, Pennsylvania. We are now scheduled to present to the Pennsylvania regulators on December 5th. We remain enthused about the potential of this site, just a 90-minute drive from New York City, a less than an hour's drive from the affluent northern New Jersey, suburbs of New York, a faux wood style of development opportunity and we expect the decision on this site by the end of the year.

Before we go to Q&A, let me conclude by saying that while we clearly have a huge amount in front of us, our number one focus remains on execution; execution in operations, executions in development; and the identification and successful nurturing of future opportunities. We remain confident that successful execution of our plans will produce tremendous long-term results and industry leading return, although trajectory of our growth will certainly not be without an interruption or two. Steady, deliberate execution of our plans in Macao, in the PRC, in Las Vegas and Singapore and in future jurisdictions remains our primary focus. That's the broadest of where we are today and that’s what will take us to higher levels of performance in the future.

And with that formal introduction, I would now like to turn the presentation over to you for Q&As and we will open the mic now, James.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of Larry Klatzkin with Jefferies & Company. Please proceed.

Larry Klatzkin - Jefferies & Company

Couple of questions, Bill. One question would be, can you just go over the effect of the Rolling Chip and how much that might have benefited you to the bottom line and how that works?

Bill Weidner

Brad has some of the detail on that, Larry.

Brad Stone

Larry, we did a calculation and came up about $17 million positive effect to our EBITDA line in terms of the hold percentage. You know, as we get further into this Rolling Chip program, we realize that there are distinct relationships between hold percentage in gaming -- Rolling Chip volume. When the hold percentage goes down, we have perhaps an artificially high Rolling Chip volume. The inverse of that is, when hold percentage goes up, we have, as Bill pointed out, a depressed Rolling Chip volume.

Let me take you through how we think about it. We looked at -- if you look at the third quarter, what we actually reported, we reported $148 million of win in the Rolling Chip program, and that’s an absolute. We won that much. The tax on that would have been about 57.8 million, so after-tax profitability was about 90.5 million. Since we dropped $33.5 billion of roll -- the commission on that would have been about 1% or roughly 35 million. So, the way we do our actual profitability first quarter -- third quarter would have been 55.5 million of profitability of the Rolling Chip program.

Now the way we would look to normalize it, we say that the win stays constant, that's the actual money we won. The tax again would be the same at 39%, so we maintain the after tax effect of $90.5 million. We do know, as we look at normalized hold in terms of the Rolling Chip program of about 2.85, the way we look at it is we take the win of 148 million divided by 2.85%, and we come up with an adjusted rolling volume that should have generated -- we normalize our hold, we therefore -- we believe have to normalize our roll at $5.2 billion. Now that 5.2 billion at 1% would have $52 million commission associated with it. So, at that calculation we net out about $38 million of profitability. So, the delta between the 55.5 and 38.5 we came up with on our adjusted and normalized Rolling Chip program yield is about a positive result, because of hold percentage were about $17 million.

Larry Klatzkin - Jefferies & Company

Thanks Brad. That was very comprehensive, thank you. Second question is, StarWorld opened up just what are you seeing, I mean, it's only been a little while. What are you seeing the spending and how the market tenure is since they opened?

Bill Weidner

I just came back over the weekend, Brad was there last week. This is Bill, Larry. I just came back over this past weekend, and it was very strong. The business pretty well all over was very strong. StarWorld I thought was a little better than I expected it to be. Generally those guys quite frankly build some pretty lousy product. That product is pretty good. I mean, it's better than I expected. Unfortunately, as usual they bought a little piece of property, not a big enough piece to do a significant casino layout. So, as expected, the first level of gaming was reasonably busy, but then as you got upstairs to the next levels, that got less and less busy. So, they did a pretty good job, I think, in the basic physical facility. Our lobby was pretty nice, nicer than expected. First layer of gaming was strong, but then the upper levels were weak, I would expect that kind of thing to continue.

Larry Klatzkin - Jefferies & Company

Okay. You haven't -- and you haven't seen any weakness or anything at your place as they open?

Bill Weidner

We are just -- it was very strong over this past week, and Monday was a holiday too. And one of the things we talk about is the fact that we built this expansion because the cost to staff table isn’t all that high, and the fact that once you hit relative to the average back over there. But once you hit a busy period of time, you [smell] a lot cash and we certainly were using that additional capacity this weekend, because it was all that strong. After a win also, it was very busy at the -- as usual in the first part of the casino, and then you get back into the corners of it and some of the tables you can't find weren't all that well, not well occupied shall we say. But generally the market was strong, lots of people running around. I didn't go to the secondary or tertiary places of the Castle Royale or the Golden Dragon or some of those other places, but we would expect them over time to wither away and be less populated as better product comes into the market.

Larry Klatzkin - Jefferies & Company

All right, or they close, as they should. Last question, as far as capacity, did you accelerate 1,500 room twice or did you actually added additional 3,000 rooms?

Bill Weidner

No, we just accelerated. Our phase one, we are going to do 1,500-room hotels on each of the site. Now we are coming behind that with another 1,500 rooms. We decided to do on five, six is accelerate that pace to build 3,000 rooms of each five and six.

Larry Klatzkin - Jefferies & Company

Okay. So you are ending up with 6,000 rooms right away on your mid-'08 opening day?

Bill Weidner

I mean, you actually have 3,000 Venetian, you have 400 some odd of Four Seasons and then you have 6,000 on…

Brad Stone

There'll be -- Larry to be clear, there will be a little bit of lag time on the second two towers on 5 and 6. So, while we project, as Bill said, roughly a September opening right now for sites 5 and 6, the towers of two additional 1,500-room tower will probably lag behind, I am going to guess, in a range right now of about six months.

Larry Klatzkin - Jefferies & Company

Okay.

Brad Stone

Now it will be good as those towers will be fully completed while we open from a structural and exterior standpoint, so that we wouldn’t expect any disruption or any usual disruption to product.

Larry Klatzkin - Jefferies & Company

All right, congratulation. Any moment on site 9?

Sheldon Adelson

Site 9, last thing we know -- this is Sheldon, Larry. Last thing we know that last time I talked to the Chief Executive, he said site 9 would be us. He just can't transfer at this time, he has done a commitment and he will keep it.

Larry Klatzkin - Jefferies & Company

Great. All right, thanks guys. Great results.

Operator

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

Bill Lerner - Deutsche Bank

Thank guys. I think their (inaudible) should bring a well armed bodyguard with him, next time he goes to Macao. Couple of questions.

Sheldon Adelson

Speak little louder Mr. Lerner.

Bill Lerner - Deutsche Bank

Yes, sir. Can you hear me know?

Bill Weidner

Now much better, thank you.

Bill Lerner - Deutsche Bank

Okay. So couple of questions. Outside of the GGP deals at the Palazzo, should we think of that you are monetizing anything else on that parcel? And then I have got follow-up.

Bill Weidner

Well, currently we are working through approvals and received our approval at the town board meeting and the planning commission for a condominium development on, what we -- used to be the, rose with grill side, currently on top of the building that’s going to house Barney's. We were seeking final approval of that project on November 8 before the Florida County Commission. Currently, the program follows about 370 ultra luxury condominiums units, that would rise up to about 50 stories of height. We certainly believe this is a premier piece of real estate. We are talking about how to possibly brand that premier piece of real estate. It provides an opportunity for us to utilize air rights that we have and maximize the value. It also is obviously [free] visitation to the properties, but I think it's our belief and people we have talked to or involved in this business believe that these units with its location right on the Las Vegas strip tied into the Venetian Palazzo complex with our various amenities, such as Canyon Ranch, our restaurant, our shopping centers, etcetera, could yield a very high sale per square foot in terms of those condominium products. So that's what we would look at as additional monetization of asset beyond the general growth deals that we currently have.

Bill Lerner - Deutsche Bank

That’s really helpful, I appreciate that. And then the follow-up is, [let me to] harp on this, because obviously it’s a lot more about gaming these says. But what happened at the high-end this quarter at the Venetian? I mean, everything else looks phenomenal with respect to non-gaming, but can you give a little bit of color there?

Sheldon Adelson

Our overall job obviously was impacted on the premium side, because we are actually up on the non-premium side by about $11, $12 million of drop. The premium side was impacted by actually one extremely good customer from last quarter in '05, and that customer created huge amounts of table drop and huge amounts of table win, and he wasn't here this quarter.

Bill Lerner - Deutsche Bank

Okay, thanks guys.

Bill Weidner

Thank you.

Operator

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

Celeste Brown - Morgan Stanley

Hey guys.

Bill Weidner

Hi, Celeste.

Celeste Brown - Morgan Stanley

Can you talk a little bit about -- more about your plans on the Cotai Strip first? Can you give a little more detail as to the cost now for 5 and 6 and 7 and 8? And then, are you still working with Far East on site 3 and then why the push back on site 7 and 8 to 2009?

Sheldon Adelson

Which push back you are saying?

Bill Weidner

Timing.

Celeste Brown - Morgan Stanley

Sorry, timing, yes.

Bill Weidner

All right. Let me first address the push back in 7 and 9 -- 7 and 8 to '09. We are going to get that thing done as quickly as humanly possible. So, we will be as aggressive we can be right now. We just recently got approval and we are on the site doing two things. We are doing test borings, as well as we are reclaiming the land again. We control sites 1, 2 and 3 for the reclamation. The government actually performed the reclamation on sites 5 to 8, and while we are currently under construction at 5 and 6, we had to content with less than stellar ground conditions and we are handling that and moving forward. But we also have an opportunity while we are developing the architectural plan to do a better job reclaiming sites 7 and 8 above and beyond with the government did, so we have a better site to work with. Once we get into the ground on 7 and 8, the development time would be roughly two years to 28 months, so I think with those articulating that if we get into -- it would be my hope that we start pilling work and start foundation work sometime in the first quarter on site 7 and 8, put a 28 month construction period. I mean, these building are now 13 million square feet. To give a little reference to that, the Venetian Macao is 10.6 million square feet and those who have seen that property would agree that 10.6 million square feet is pretty impressive, 13 million is even more impressive. So, the reality as we think, a 28 month time schedule is appropriate. You take that out until, say, the March timeframe. You will find ourselves somewhere in the mid '09 in terms of opening those assets.

As far as cost of development of these assets, we are looking at a range of about $3 billion in terms of cost to the development of those various assets. We are running about in terms of construction cost about $230 to $240 a square foot, we feel that’s very positive in today's marketplace. We do [buying here] same thing in Macao with cost of materials being high, just like anywhere else in the world, and it is a more heated construction development market with all the activity going on. But as we pointed in the past, we have a huge advantage of being by far without question a most aggressive developer there, and so, we usually have first choice to the market of the contractors we want to not only provide a cost effective building, but also one that is well built and well designed. So, that’s kind of where we are in those process.

Celeste Brown - Morgan Stanley

Sorry, so the 3 billion is -- 3 billion total for site 7 and 8, and then 3 billion total for site 5 and 6.

Bill Weidner

Yes. We separately 3 -- it's in the $3 billion range, obviously -- in terms of all that, that does not include the land cost on that number.

Celeste Brown - Morgan Stanley

And so, 6 billion --

Bill Weidner

Obviously, the land cost is negotiated and calculated between us and Macao government. So, we are not jumping ahead necessarily until we finalize our plans, because the way the calculation is done, I am sure as you are well aware, Celeste, is what -- space is what type of space and there is a premium calculation and then a determination of potential discounts, reclamation costs, credits, etcetera.

Celeste Brown - Morgan Stanley

So, essentially 1.5 per site?

Bill Weidner

No, 3 billion.

Celeste Brown - Morgan Stanley

For all four.

Bill Weidner

3 billion for 5 and 6, 3 billion or so for 7 and 8. 3, 7 and 8 may be a little more expensive simply because of inflation.

Celeste Brown - Morgan Stanley

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

Bill Weidner

You are Chairman of the company.

Sheldon Adelson

I don’t think we said that we are going to build 6,000 homes on each of 5 and 6 and each on 7 and 8.

Bill Weidner

I think we made -- hopefully we made it clear that price just to make it follow-up on that, that sites 5 and 6 includes 6,000 plus rooms, plus 1.2 million square feet of service department complex. And the same thing occurs on site 7 and 8, 6,000 plus rooms, plus 1.2 million square feet of service department complex.

Sheldon Adelson

This is Sheldon. Let me clarify that. We are building approximately 19,000 rooms; 3,000 each on 5 and 6, 7, 8 and 3; and not one with the Venetian that’s six times three is 18,000. Now, there may be extra 100 or two on each slot, so combined with the 400 Four Seasons, it's approximately between 18,500 and 19,000. That does not include the service to preference.

Celeste Brown - Morgan Stanley

Okay. I am sorry to be a pain. Where do you stand in terms of your negotiations with Far East, are you able to comment on that today?

Sheldon Adelson

I don’t have any updated comments. The last thing we were doing was, trying to finalize the agreement. We are doing so based upon the moral obligation that we feel within. And we are trying to work out the details. Frankly I'm not quite up-to-date, I'll make the call tonight.

Bill Weidner

I won't say this.

Sheldon Adelson

If we have something to put out immediately, we will put out a press release.

Bill Weidner

I won't say this. The business transaction does not preclude us from moving forward in terms of design, development and we are going to continue on that process, and again, that would be a project that we hope will probably start by next summer, getting the plans done, getting approvals and then pilling. If we do it sooner, we will. But, the transaction between ourselves and Far East, we are going to be the developers of the site, we are going to be the overall designers of the site, and because of that we are going to move forward and do exactly that.

Celeste Brown - Morgan Stanley

Okay, thank you.

Bill Weidner

Thank you, Celeste.

Operator

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

Robin Farley - UBS

Thanks, couple of questions. First, can you talk about how many interest or plans you might have in operating ferries -- having LVS directly operate ferries from Cotai? And if that’s something you wanted to do, how quickly could that be up and running, would it before the Venetian Macao opened?

Sheldon Adelson

We've always planned from the beginning that the likelihood of our operating ferries might become mandatory. From about a capacity standpoint and a competitive standpoint, we need to operate the ferries. We put out an RFP and we are now evaluating the returns for ten 420 or 430 passenger ferries. We will either operate them ourselves and/or we will have the management company operate them for us. It's one of the things that we have always believed that additional transportation capacity is necessary and in that respect, I am quite pleased to read almost -- at lease once a week of another route -- airline route being established by some carriers somewhere to accommodate the demand that is arising and will arise from all operation.

Bill Weidner

Also, I think we are encouraged by the construction of the second ferry terminal, that's right at the foot of the airport, right near the Cotai Strip. So, it almost doubles the amount of slips available for ferry service from Shenzhen, from the airport, from the Hong Kong airport as well as Hong Kong itself, so that alone then opens another transportation opportunity.

Robin Farley - UBS

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

Brad Stone

I think it will be -- there might be some overlap. We may get two or three by that time, but we won't get all 10 by this summer. We should have all 10 by the end of the year.

Robin Farley - UBS

Okay.

Brad Stone

We haven't -- we are in the process of the valuating the responses for the RFP and one of the things that's very pivotal is delivery term. This is a relatively minor investment, but a very important cog in the wheel to have additional capacity, but just FYI, with 430 times 4 an hour, is 1,720 capacity an hour times, let's see, times 14 hours, let's see, 430 times 4, times. At least, say 30,000 capacity a day.

Robin Farley - UBS

Okay, great. And then for Hengqin, I guess it had seemed like that you had already had Guangdong Province approval and it seemed like the only thing that was still outstanding with getting Beijing approval. And, it sounds like a lot of progress is made. I guess, I thought Beijing is the only thing that was left to get it. I wonder if you could update us on the timing of that.

Bill Weidner

Let's put it this way. The significance of the fact that they allowed me to quote them is a meaningful significance.

Robin Farley - UBS

With the 17th Party Congress in March, does that -- do you still expect that seems to be holding other things up in terms of Beijing approvals? Is that something that you think could delay your approval for Hengqin?

Bill Weidner

No, you didn’t hear me. Guangdong would never allow me to make that statement.

Robin Farley - UBS

Okay. So --

Bill Weidner

Understand.

Robin Farley - UBS

They will get the -- you will get the approval from Beijing by -- before March, is what you're saying?

Bill Weidner

I can't say that. I can just say what I’m authorized to say, and authorization wouldn’t take place.

Robin Farley - UBS

Okay.

Brad Stone

He said, Bill said, Robin, that the final decision is likely to occur before the end of this year, that's within the next 60 days.

Bill Weidner

Right.

Brad Stone

You will have to accept that as much as we can say.

Robin Farley - UBS

Okay.

Brad Stone

There's one thing I'd like to add and clarify. When Bill read that we are going to invest 2 billion and 10 billion, we expect to invest primarily in the infrastructure upfront, which in Chinese terms will be a significantly lower than what it would be even in Macao, because of the cost of labor and construction in China. Therefore, we expect to pre-sell virtually every villa or apartments, unless we feel for some reason, we don’t want to pre-sell and we want to get them up in some cases like timesharing or fractionals or if we pursue that approach. So, we are not looking to spend. We are looking to self finance the project and we don’t know yet, it's still too far away to say what the infrastructure will cost, but then we will start selling. It should self finance just like most other condo developments.

Robin Farley - UBS

Okay, great. And then, last question is actually just on Las Vegas. And just to clarify, you mentioned the poker volume, a lot of that was driven by one player in last year's quarter. Just what we have seen so far in the Las Vegas market, we don't have September figures yet obviously, but so in August, the volumes were up very strongly overall in the market, Maybe September ends up low enough that the quarter is not up that high, but I guess I just wanted to get some color on when we do see what the overall market has done for the quarter, whether you feel like there's been share loss or anything overall for the quarter outside of that one player?

Scott Henry

I believe share (inaudible). I believe is result of business and finally come one quarter or next quarter, but you can't look at it quarter-by-quarter. The problem with the high-end is, as you know, historically [seasonal] everybody else is that this is a business where a player, two players, three players can make significant difference. So, I think you have to look at our overall business and look at our overall volume. And I think that anywhere in this town, couple of customers come in and create tens and millions dollars of potential win can impact that month that quarter.

Bill Weidner

If you were to look at our months and months' results, I mean, the primary impact of our business volume were obviously month of July. So, when you look at August numbers coming out, we see increase there. We shared in that, we're actually up in that period. So -- and September we were not quite up as much on a yearly basis, most of our [affect] of that loss -- of that drop occurred during the July period.

Robin Farley - UBS

Okay. Great, fair enough. Thank you.

Operator

Your next question comes from the line of [Rishi Parekh]. Please proceed.

Rishi Parekh

How are you doing? Just got a couple of quick questions. On Palazzo how much have you paid to date and how much do you have left to go?

Bill Weidner

Of the capital expenditure?

Sheldon Adelson

If that’s a question --

Bill Weidner

Why don’t you go -- we will get the book out here. Why don’t we go to the next question and we will get to you that back.

Rishi Parekh

My next question is also a CapEx question. I just want to get an idea what the total cost was for the 450,000 square foot meeting space?

Bill Weidner

I am sorry, the meeting space in Palazzo?

Brad Stone

The cost, yes.

Rishi Parekh

Yes. The cost of it.

Bill Weidner

Cost of that -- there were two components in that cost. When we built the Venezia Resort expansion in 2003, we actually brought the first level out when we built the steel superstructure. I believe the cost we spent for the additional space was roughly about $100 million for the remainder of that square footage. It was -- that was partially built. We took a lot of infrastructure and put less than --

Sheldon Adelson

I think what he is asking is whether or not that’s in the budget for the Palazzo as opposed to being the two way budget.

Bill Weidner

If that’s what he is asking, that is in the incremental construction that took place after 2003 and it's in the Palazzo construction budget.

Rishi Parekh

Okay.

Bill Weidner

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

Rishi Parekh

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

Bill Weidner

We opened that incremental space partially in November, and partially after the first of the year, this year. What happened was since the seal structure was already there since 2003 we had the opportunity to open that space well ahead of the opening of the Palazzo. So we took the opportunity to get one issue off the development construction block, and have an asset contributing sooner than later.

Rishi Parekh

Okay.

Bill Weidner

Once -- the Palazzo to date that we've spent is just about -- it looks $940 million in terms of the capital cost for both the Palazzo and the Palazzo Mall. The budget on that project is currently $1.8 billion to $1.85 billion. So, we're roughly half way through the spent.

Rishi Parekh

And what is the debt at the [bond hotel] level that is shift to debt?

Sheldon Adelson

At the bond hotel level?

Rishi Parekh

[Bond hotel]?

Bill Weidner

The bonds are at the parent company. And the total debt is on the parent company overall. Pardon me?

Sheldon Adelson

250.

Bill Weidner

It’s a $250 million issue. That’s outstanding at the parent level.

Rishi Parekh

Okay, great, thank you.

Operator

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

Steve Kent - Goldman Sachs

Hi. Maybe you could just comment a little bit about what you're thinking on the pricing for the service apartments on Cotai, especially given Shun Tak's recent comments about their once central property selling out at a very nice clip, at least initially, and what that value creation could be from the service apartments just as a reminder, and again, sort of the $9 billion to $11 billion of spent overall in Cotai. And then the second question is, just on Hengqin, you mentioned may be some of the issues that you're facing with that before proceeding which would -- I think my recollection is that it maybe tax rate, it maybe Visa issues, it maybe some other things, what kinds of things are sort of out there that -- or a better way I guess of asking is, is there any of those issues that would sort of be like we're not going forward, we can't get comfortable with one of those issues?

Bill Weidner

Let me understand it.

Steve Kent - Goldman Sachs

On the second --

Bill Weidner

Okay, I understood, let me start with the second question first. Here it is a difficult to do in an environment like this. I'm being very careful with my wording because you never want central government to think that you are doing something that oversteps your bounds. So you have to be clear about what decisions have been made, or how -- about the real estate development, and those issues that are still policy decisions. Policy decisions are directed by Beijing, and when we talk about things like cross border, communications, when we talk about things like money exchange, those things are clearly and squarely in the hands of Beijing. Those are value adds that will make Hengqin even more valuable than now. If the government decides to allow Hengqin to handle cash transactions, currency transactions, it’s a big deal.

Steve Kent - Goldman Sachs

Okay. That I understand. Thank you.

Bill Weidner

If the government allows cross border, in other words, if they allow almost like a bonded area to where you could freely go across from Macao to Hengqin Island, those are items that were on the table that the government reserves the right to make the final decisions on. Those decisions wouldn’t change our mind about the real estate development on Hengqin, it will just enhance the value of Hengqin.

Sheldon Adelson

Steven, this is Sheldon, to address your first half of the question. The original anticipated price per square foot, since this is going to be the only destination resort strip in all of Asia, we feel quite confident that the -- we're going to reach for the upper levels, and at some cases, I think of course, we're going to go out of the same numbers, but I'm hoping that it will turn out to be that we've been quite conservative. On the freestanding apartment set the Four Seasons, the vacation suites, we hope to get our original plan called for $1,400 a square foot. Now in Hong Kong churns, when they charge a price they include the square footage of the common areas. We hope we'll be able to do that in all of the Cotai Strip. The balance of the apartments were always on the opposite side of the Strip that were integrated into the existing buildings that make the top floors. We anticipated those at $800 a foot. I think, however, we could probably nudge that up a little bit and hope we can move it up to 1,000. But I know those are not the numbers in Macao, but they’re not on the Strip. There's going to be a once in a lifetime opportunity for these Asian people to get an apartment on Asia's Las Vegas Strip. And we are confident that the prices will be accepted readily.

Steve Kent - Goldman Sachs

Okay, Sheldon, thank you.

Sheldon Adelson

You're welcome.

Operator

There are no further questions at this time. I would now like to turn the call over to the hands of Mr. Bill Weidner.

Bill Weidner

Thank you. I just want to summarize by saying that we had a very good operating quarter. Our development, our construction activities are moving forward, both in Las Vegas and in Macao. And our activities in Macao and in Singapore particularly have solidified our reputation in the mainland, China, as well as in Japan. So, we remain extraordinarily bullish about our future, near-term and long-term, and with that, hopefully it would be summarization of our conversation today. I thank you all for joining us and I look forward to our next quarterly conference discussion. Thanks again and have a good day.

Operator

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.

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