Analyst: Chances ‘low’ that Las Vegas Sands will complete ‘Eurovegas’

Chances are "low" that Las Vegas Sands Corp. will complete a $22 billion gaming complex in Madrid, a gaming analyst says.

The casino operator announced late Friday that it had selected Madrid over Barcelona, Spain, as the location of its planned "Eurovegas," which could include 12 hotels and six casinos.

Las Vegas Sands officials said the process was still in the early phases. The company said it would provide 25 percent to 35 percent of equity needed to build.

That fact, said Nomura Securities gaming analyst Harry Curtis, jeopardizes the development long before a shovel is even in the ground.

"As a practical matter, securing adequate financing is Las Vegas Sands' major hurdle," Curtis told investors Monday, adding that the company's "likelihood of completing a multi-billion project remains low."

Las Vegas Sands said Friday it needs to select a site while resolution of Europe's current economic challenges would be "an important consideration."

Curtis said that lack of available funding could diminish the project's size and scope and could become a distraction to the company's management.

"We think the company's first priority must be maximizing the (cash flow) and (return in invested capital) in its existing portfolio," Curtis said.

Shares of Las Vegas Sands closed Monday at $43.41, on the New York Stock Exchange, down 89 cents, or 2.01 percent. Curtis had worried the company's announcement Friday would "stir up a hornets nest's worth of questions from shareholders."

Deutsche Bank gaming analyst Carlo Santarelli also worried that an investment by Las Vegas Sands in an ambitious project might impede the company from returning capital to shareholders, either through increasing dividends or a large-scale share repurchase.

"We don't believe the investment community will immediately warm up to the idea of Spain or be enamored with potential returns," Santarelli said in a research note. "The ability to sell, to the investment public, the merits of a large scale integrated resort in a relatively underpenetrated region will become easier over time as the situation in Europe stabilizes or begins to improve."

A spokesman for Las Vegas Sands declined comments on the reports.

Las Vegas Sands said selecting Madrid is the first phase of the project, followed by determination of the size, scope, specific location, and financing options from the capital markets.

'Eurovegas' drew interest from both Madrid and Barcelona, cities hurt by high unemployment and shrinking government revenues as the economy languishes. If developed, the project could be completed around 2025 and could create more than 200,000 jobs in a country where one in four is unemployed.

A newspaper in Madrid last week reported the government is reviewing the potential deal with Las Vegas Sands. According to the newspaper, the project would get tax incentives. However, labor laws and indoor smoking restrictions would not be modified for the casino complex.

Curtis said lack of resolution in those issues favorable of Las Vegas Sands, "could put a stake in the appetite" of company Chairman Sheldon Adelson to move forward.