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Venetian Breaks Las Vegas Profit Record

27 April 2004

Las Vegas Sun

by Richard N. Velotta

LAS VEGAS -- Weeks away from opening a casino in Macau, the owner of The Venetian today said the Las Vegas Strip megaresort shattered Las Vegas hotel-casino profitability records during the first quarter.

The company said the opening of its 1,013-room Venezia tower -- giving it 4,049 rooms -- and increased business in its expanded convention and meetings center contributed to the higher results and the company also reported improved traffic in its recently sold mall, higher food and beverage sales, improved room occupancy levels and higher average daily room rate.

Las Vegas Sands Inc. said quarterly cash flow of $103.9 million for the quarter was the highest for any single property in the city's history. A spokesman said the company researched figures of individual properties over several years and determined the best cash flow has been at MGM MIRAGE's 3,005-room Bellagio hotel-casino, which had cash flow of $99.5 million in the first quarter.

MGM Grand is the city's largest hotel with 5,034 rooms.

The Venetian's parent company also was graced with luck -- casino volume and win was up with the company profiting on the Chinese New Year holiday. A spokesman said there were no calendar quirks that benefited the quarter, although because of Leap Year, the company had one additional day of operations that it didn't have in 2003.

The company reported record net income of $37.8 million for the quarter compared with $13 million for the same period a year ago. Revenue for the quarter was $220.8 million compared with $158.7 million for the same quarter in 2003.

Privately held Las Vegas Sands has public debt requiring it to release quarterly results. The company was scheduled to conduct a conference call later today.

In a release announcing results, William Weidner, president and chief operating officer of Las Vegas Sands, said net income for the quarter exceeded any full year net income in the history of the company.

"The opening of the Venezia Tower at The Venetian during 2003 represented further confirmation of our business plan to combine group rooms demand with individual suite room sales and casino promotional activities to allow us to achieve these record results," Weidner said in a statement.

Hotel revenue was $85.4 million for the quarter, a 48.5 percent increase over the $57.5 million reported in the same period a year ago. Revenue was fed by a higher average daily room rate, from $217 a night during the 2003 quarter to $235 a night in 2004. Even with the extra rooms in its inventory, the occupancy rate climbed from 97.4 percent in first quarter 2003 to 98.9 percent a year later.

Food and beverage revenue, driven by the new rooms and convention space, also increased dramatically for the quarter. The company reported revenue of $33.5 million, a 66.7 percent increase over the same period a year ago.

Casino revenue climbed 29.2 percent to $94.7 million for the quarter. The company said table game win percentage was higher than normal for the 2004 quarter (28 percent) than it was in 2003 (24.1 percent).

Volume also was strong. Table game drop was $259.5 million for the quarter, compared with $220.8 million for the same period in 2003, and slot machine handle was $482.9 million, compared with $449.4 million in the year-ago quarter.

The Venetian's mall subsidiary, which operates the Grand Canal Shoppes, generated rental and related revenue of $10.6 million, an 11.6 percent increase over the year-ago quarter.

The company announced earlier this month that it is selling the 500,000-square-foot mall to General Growth Properties Inc., Chicago, for $766 million.

Weidner said after the repayment of debt and taxes associated with the gain, the company is expected to realize $560 million from the sale.

The value of the transaction is expected to climb even higher because the company also sold the rights to the Phase II portion of the mall for $250 million plus an amount based on the net operating income of the addition.

Company officials say they are evaluating how they'll use the proceeds of the mall sale. The company has its Las Vegas Phase II development on the drawing board and has begun clearing land on Strip frontage north of the existing Venetian property for construction. A construction timetable has yet to be announced for the as yet unnamed project, which was submitted to Clark County officials under the name Palazzo tower.

The company has another major construction project on the horizon -- the development of a master-planned hotel-casino project in Macau, a Chinese resort city. A 3,000-room replication of The Venetian hotel-casino in an area known as the Cotai strip in Macau would be the centerpiece of the development and could be partially funded with proceeds from the mall sale, which is expected to close May 17.

May will be a busy month for another reason for the company. The Sands Macau, formerly known in that city as the Las Vegas Sands, will open its doors next month.

Located near Macau's ferry terminal, the Sands Macau will have 319 table games, 600 slot machines, and 18 restaurants, bars and entertainment centers in a 1 million-square-foot building.

The company also is wrapping up deals to develop casinos in Great Britain.

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