South Shore hopes to offload its The 13 Hotel in Macau in the next five months. Costs are spiralling out of control and the developer is prepared to cut its ties.
Why anyone would name its hotel The 13, a number considered unlucky in most cultures is beyond us. But that’s what South Shore did. The project has looked doomed from the start, perhaps as early as the drawing board.
The 13 Hotel in Macau began opening in August 2018 but is massively over budget. South Shore estimated the overall cost to be just shy of $2 billion but the cost skyrocketed after continual delays. Each room cost $14.2 million to design and create. A quite ridiculous $120,000 per night fee was meant to recoup those astronomical costs.
Amazingly, despite trying to appeal to mega-rich tourists, The 13 has no casino! South Shore doesn’t even have a casino license, never mind an actual casino.
Plans for a 66 gaming table casino haven’t been realised. A quarter of these tables were earmarked for gambling’s elite, the players who spend vast sums of money.
South Shore Takes On More Debt to Pay Debts
South Shore lost $79.26 million in the year The 13 opened. Financing the hotel didn’t come cheap. Loans equating to $533.69 million incurred massive interest payments. It took out another $271.34 million loan despite of all this.
The company bought a fleet of bright red Rolls Royce Phantom cars for $28.4 million three years before opening The 13. It sold 24 of them in June 2019 for $105.6 million and used the money to pay back an overdue bank loan.
Demands for $454.62 million came days after another for $86.12 million. The Rolls Royce sales didn’t cover the costs but kept the bank off South Shore’s back.
Losses of $1.06 billion followed last year, prompting South Shore to give up on The 13. Wanting to give up on a project is one thing. Getting someone to take on the project is another thing entirely.
The company is listed on the Hong Kong Stock Exchange. It’s here South Shore announced its intention to offload 60% of its holdings. An unnamed major shareholder agreed to pay $217.3 million for South Shore’s holding. This later changed to $135.9 million but even that fell through.
Deal Falls Through, Massive Losses Continue
The agreement to buy 50% of The 13 fell through in September. Neither South Shore or the mystery buyer could come to an agreement. South Shore reported losses of $186.9 million for the month of September 2020 alone. It’s outstanding liabilities weigh in at a massive $806 million.
An independent auditor valued The 13 at $750.93 million. This seems way off considering the huge liabilities and lack of performance. Add into the mix the uncertainties created by the COVID-19 pandemic and that valuation seems very wrong.
We may soon discover what The 13 is actually worth. This is because South Shore still hasn’t paid by the $454.62 loan the bank wants paying immediately. The bank is within its rights to liquidate the company assets. South Shore hope to find a buyer for The 13 before this happens.
Finding a buyer with enough funds is an unenviable task during these uncertain times. Finding one who’s prepared to take on the seemingly doomed project with no end to COVID-19 in sight is impossible. If, and it’s a big if, The 13 had a casino then the outlook may be different. As it stands, nobody in the right frame of mind will take on this poisoned chalice.
It does make you wonder why someone would invest billions of dollars and not have a casino. They must have more money than sense and they don’t have any money left.