HONG KONG -- The Chinese arm of U.S. casino company MGM Resorts International signed a land deal Thursday for a new $2.5 billion casino resort in Macau, the world's biggest gambling market, hoping to catch up with the rapid expansion of rival casino operators.
MGM China Holdings Ltd. said it formally accepted a long-awaited land concession contract from the Macau government for a 17.7 acre plot in the Cotai district, an area of reclaimed land that's earmarked for all new casinos.
MGM China said it is paying $161.4 million for the land, including a $56.2 million down payment. The rest will be split into eight equal installments.
The company plans to build a casino resort with a "truly unique MGM experience" that will include a five-star 1,600-room hotel, 500 gambling tables and 2,500 slot machines, MGM China said in a statement to the Hong Kong Stock Exchange, where its shares are traded. The company is a joint venture between Las Vegas-based MGM Resorts International and Pansy Ho, daughter of Macau casino kingpin Stanley Ho.
Analysts estimate the company's share of the market is among the lowest of the six casino operators in Macau, the only place in China where casinos are legal. The deal means MGM China will be able to catch up with rivals that already operate in Cotai or have received approval to expand there.
U.S. casino magnate Wynn signed a land deal earlier this year to build his first Cotai resort, which he said will cost $4 billion. Wynn and MGM China operate one casino each in Macau.
Macau's casino revenues have rocketed since its government opened gambling to foreign operators about a decade ago. The former Portuguese colony raked in $33.5 billion in gambling revenue last year, more than five times the amount earned on the Las Vegas Strip. Wealthy "high-rolling" gamblers from mainland China have powered years of blistering growth, though it has leveled off this year as China's economy slows.
Macau casino operators are hoping to attract more middle-class families to their developments on Cotai, which was formed by reclaiming land between two islands. It's the only area with enough space for the mega-resorts that the companies want to build in Macau, which is also made up of a cramped spit of land jutting out from mainland China.
The "development of the Cotai land will offer compelling growth opportunities in the future," MGM China said.
In addition to the land premium, MGM must also pay annual rent of about $269,373 during construction, which is expected to take 36 months. When it's complete, the rent rises to $681,454.
The land lease is for 25 years.