Adelson Rolls the Spanish Dice

by Jim Woods | April 16, 2012 10:49 am

Sheldon Adelson didn’t become a billionaire by making bad bets, but his latest announcement raised a few eyebrows even from admirers.

The chairman and CEO of Las Vegas Sands (NYSE:LVS[1]) recently unveiled plans to spend $35 billion on what’s been described as a mini-Las Vegas strip in — of all places — the heart of Spain. Adelson currently is evaluating the country’s two marquee cities, Barcelona and Madrid, to see which would offer the greatest advantages. Interestingly, Adelson gave the announcement at a press conference ahead of the opening of his new $4 billion casino property in Macau.

Here’s the money quote from the billionaire businessman about his Spanish venture:

“We are looking at 12 integrated resorts, 3,000 rooms each. A mini Las Vegas, about half the size of the Las Vegas strip in Spain for the European market.”

The mini-Las Vegas Spain project would cost an estimated $2.5 billion to $3 billion per building[2], no small amount in a region riddled with debt problems. But Adelson, who has been in the news of late because of his big financial support for Republican presidential hopeful Newt Gingrich, isn’t looking at the mini-Vegas project in terms of the immediate future. Rather, he said the project would take anywhere from five to 10 years to complete.

What the Las Vegas Sands chief is betting on here is that high-end customers from Western and Eastern Europe will make the trek to the novel property, and that by the time it’s finished, the fiscal unknowns currently plaguing the region will largely be settled.

Now, the question of where the Spanish economy will be five or 10 years out certainly is open, but for gamblers like Adelson, taking on the risk of creating a marquee property now when borrowing costs and building costs are near all-time lows might turn out to be the wiliest wager of all.

The Spanish project is perhaps the most unique, but it’s not Las Vegas Sands’ only planned venture. The company also has plans to expand throughout Asia, and build on the success it has enjoyed in the region with its marquee properties in Macau and Singapore.

“We are looking to build two (hotel/casinos) each in Japan, Korea and Vietnam. Taiwan is late in catching up. There is pending legislation in the other three countries,” Adelson said at the Macau presser. That announcement came right before the opening of the new Sands Cotai Central, a stunningly costly property featuring 5,800 rooms, 300,000 square feet of gambling space and 1.2 million square feet of shopping, entertainment, dining and convention facilities.

The build-out of this new property also can be seen as a gamble, especially given the banter about China’s so-called “hard landing.” Remember, however, that Macau is the only place where Chinese nationals are legally allowed to gamble in casinos. And despite the recent slowdown in the Chinese economy, gambling revenue in the former Portuguese colony surged 24.4% year-over-year in March to 25 billion patacas ($3.1 billion).

Of course, Adelson isn’t the only billionaire building on the streets of Macau. Steve Wynn, CEO of Wynn Resorts (NASDAQ:WYNN[3]), also operates properties in Macau, and of course, in the actual Las Vegas. Wynn is estimated to have a net worth of about $2.5 billion and is ranked 130th on the Forbes 400 list of wealthiest people in America. Adelson is estimated to be worth about $24.9 billion and ranks eighth on the Forbes 400.

With big gambles like a mini-Las Vegas in Spain, you can see how Adelson rolled the dice and achieved the kind of success that would fill even Wynn with envy.

Now the question is: Should investors bet on LVS shares based on the company’s ambitious growth plans?

I don’t know about you, but based on past performance, I suspect that getting your chips aligned with Adelson might just be a big winning bet.

As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.

  1. LVS:
  2. estimated $2.5 billion to $3 billion per building:
  3. WYNN:

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