The new Casino Royale
A plot of land on a tropical island will deliver a $1m a day jackpot to a group of Scottish entrepreneurs, writes Stephen Breen
WHEN Scottish architect Tim Potter first visited the Penghu islands in the Taiwan Straits almost a decade ago, he must have felt as though he had stumbled on to the Bahamas of the 1940s – crystal clear aquamarine waters, pristine beaches and reefs, and barely a tourist development in sight. Potter, a long-time resident on mainland Taiwan, immediately called his business partner Ian Irvin in Edinburgh and declared: “I have found the place where I am going to die.”
Irvin flew out and also fell in love with the unspoiled beauty of this little piece of paradise that had somehow managed to escape the attention of the world’s tourism industry. The
fact that, bizarrely, wild thistles were growing on the finest stretch of land they could find on the group of 64 islands convinced the Scots it was their fate to develop the site.
Irvin, an accountant and entrepreneur who was group finance director of the £65m public company Magnum Power, and Potter, formed Amazing Holdings with plans to build an upmarket beachfront hotel that could pull in wellheeled visitors willing to pay $1000 a night. The pair were convinced they were on to a winner, but four years ago, their luck got even better when the Taiwanese government made the surprise announcement that it was considering allowing gambling on the islands.
What began as a relatively modest tourist proposal on Fongkue Beach now has the potential to be a gambling goldmine that could rake in a staggering $1m dollars a day in clear profit. Amazing has teamed up with Las Vegas-based casino legend Larry Woolf, whose Navegante group would operate the development on their behalf. When it comes to gambling, Woolf is one of the industry’s genuine big-hitters, who has run a string of casinos in Nevada, and in 1990 he opened what became the first $1bn casino in Vegas, the MGM Grand.
The world’s big casino operators have been desperate to get into south-east Asia for decades to be right on the doorstep of some of the world’s most fanatical gamblers. The number of genuine high-rollers – the type of steely-nerved individuals who wouldn’t flinch at laying down $1m a night in chips – is relatively small and known to all the big operators, and according to Irvin, 70% of them are in south-east Asia and Japan.
The first Klondike-like scramble to get into this lucrative marketplace came in 2002 when the Chinese authorities issued three casino licences in Macau, the former Portuguese colony which is just one hour from Hong Kong by fast ferry. No less than 20 of the big boys applied to get into Macau, which has been a roaring success. It was predicted to generate $6.8bn last year – outstripping even Vegas itself by an estimated $800m.
In January, Sir Richard Branson announced he was close to financing a deal to build a £1.5bn casino in Macau. The Las Vegas Sands and Wynn Resorts, two of the world’s leading gaming companies, have already built megacasinos in Macau. It is thought gambling giants such as MGM Mirage may follow suit.
If the Taiwanese authorities do give the green light for gambling on the Penghu Islands, Irvin, Potter and fellow Scot David Mathewson – a former director of merchant bankers Noble Grossart – are at the head of the queue to cash in. They are confident they are the only operator with a big enough parcel of land to build a casino and believe they are two years ahead of any potential rival. Having an experienced operator like Woolf on the board is another trump card.
Through a wholly-owned Taiwanese subsidiary, their AIM-listed company is planning to spend at least £300m on a worldclass 600 bedroom luxury hotel, and a multilevel casino over 130,000 sq ft.
The company is “70% conf ident” the Taiwanese government will legalise casinos under the Remote Islands Act before elections in December, but opinion polls suggest a more pro-business party will come to power then, making the gaming dream even more likely.
Even if the Taiwanese authorities unexpectedly decide against legalising casinos, Amazing is going to build a 100-room luxury hotel on part of their 27-acre beachfront plot and hope to break ground later this year.
“The Penghu Islands are the best kept secret in south-east Asia,” said Irvin. “It is only a 40 minute flight from Hong Kong and I can’t
understand why it isn’t crawling with tourists. If you can imagine the Bahamas but you strip away all the western development and leave all the infrastructure like four lane highways and a fantastic mobile phone network, that’s what they have.
“Infrastructure-wise, it doesn’t get better. It is staggering – I can’t get my head around it. We’ve sent quite a few investors out there and they have come back to us and said: ‘This is really incredible – do you guys realise what you’ve got?’ We are pioneering and so are the authorities on the Penghu Islands.” It was a change in the law in 1998 allowing foreigners to buy on the Penghu Islands that opened the door to Irvin and Potter. The site they identified was worth $300,000 as farm land, but the Scots offered the land-owners $7m on condition that it was re-zoned for a hotel. The deal was incredibly complicated because the site was broken into a patchwork of more than 100 parcels of land owned by in excess of 300 people.
They used a local governor to act as an honest broker and are convinced these close ties with the locals – and the fact that they have been on the ground for years ahead of any potential rivals – will help make the project a success.
“The people there are quite like the people from the Western Isles,” said Irvin. “If you come in and bang your first on the table and talk about kicking ass, they will tell you where to get off, but if you respect them and get close to then, you can do all sorts of things.”
Irvin and Potter set up Amazing Holdings in the Isle of Man and borrowed the $7m by issuing 14 $500,000 debentures which were converted to shares when the company listed on AIM in 2005. Irvin admits the news in 2003 that casinos might be licensed on the islands threw the company into “a bit of a tailspin” for a couple of months. “We didn’t know anything about gaming, but we knew that it made a good project even better.
“I met various financiers in south-east Asia and they all said they would write us a cheque for $200m in a heartbeat if we had a casino licence – and these guys don’t take risks. Bill Weidner (CEO of the Las Vegas Sands) likened gaming to spitting on the ground – you can’t miss. If gaming is allowed, we’ve got a footprint and we are capable of taking on a casino and another hotel.”Irvin, a former Royal Navy seaman and kirk elder, is a modest man who insists he didn’t get into this development to make millions. But the potential profits are so staggering they could make any man’s head spin, and as we meet in a Starbucks café in Edinburgh, Irvin struggles not to get carried away.
“When I got into it at first the goal was to make a bit of money to buy an MG sports car,” he insists. “Now, I try not to think about it, but Larry says the company can make $1m a day. We didn’t go into this to have a casino and if you go in to make a lot of money, that’s the wrong way. You have got a responsibility to your shareholders and wider society and you have got to sort that out first.
“It’s fun, I’m enjoying it, but I try not to think too much about the money. If it all comes good, I might take a bit of time off.”
If these canny Scots do hit the casino jackpot, Irvin might find himself shopping for a lot more than an MG.
Hitting the jackpot: Ian Irvin (left) reflects on an amazing business story based on a giant casino (artist’s impression above) on the Penghu Islands (above right)
Much to ponder: Irvin’s company could be making $1m a day in profits