It was a brilliant PR campaign. One day Sydney was to have a new harbourside ”cultural precinct” of parklands and public recreation areas. The next day there was a whopping big casino on it.
Lend Lease development boss David Hutton surely choked on his Weeties when he reached for the newspaper last weekend only to find this ”jewel”, this ”world-class centrepiece” of a casino-hotel sitting smack bang in the park next to his own hotel development site at Barangaroo South.
There were even pictures, artist’s impressions, of this glittering edifice towering out of the hitherto grasslands at Barangaroo Central on the western flank of Sydney’s central business district.
Interred in the mundane details of the other ”exclusive” story in another newspaper on the same day was the casual observation that James Packer’s Crown, the casino operator behind this truly magnificent and visionary development, might need to get the odd law changed, not to mention a regulatory approval or two.
There was also the trifling fact that Sydney had but one casino licence and that singular licence belonged to Echo Entertainment until 2019, the operator of the Star casino at Pyrmont that would stare straight across the bay at Crown’s putative gaming palace.
Perhaps that licence might be stretched across Darling Harbour. It’s only 100 metres of water. And, by the way, Crown would first have to take control of its competitor, Echo, which has just splashed a billion dollars on a world-class upgrade of its own.
Details, schmeetails. Packer advised Echo chairman John Story that he should shuffle over and kindly give Crown a seat at the boardroom table. Synergies and all that.
In the meantime, Crown had advised the sharemarket that it ”had lifted” its stake in Echo from 4.9 per cent to 10 per cent. That was last Friday. One week later, three days after the stock exchange deadline, and there is still no disclosure that Crown owns a single non-derivative share.
This was perhaps Packer’s only tactical error. Crown should have chucked another zero on the end of that ”10” per cent. This was a derivative 10 per cent after all. It means what you want it to mean, and it settles when you want it to settle.
Why not this? ”Crown Limited announced today that it holds a 100 per cent interest in Echo Entertainment Group by way of a derivative. John Story and Larry Mullin, we draw your attention to our derivative. You are trespassing on our licensed premises. Please vacate the building immediately.”
Deutsche Bank, which apparently is not an associate of Crown but apparently has concocted the derivative, is surely capable of whipping up another derivative to deliver ownership at a convenient point in the future.
More important, the government and its allies were quickly squared away. ”Visionary … iconic”, Alan Jones said of the new casino first thing Monday.
”I think it’s an exciting proposal which could add extra life to Barangaroo, give Sydney another world-class hotel, generate jobs and boost tourism,” an enchanted Barry O’Farrell said. Sydney is ”crying out” for this kind of investment, the Treasurer, Mike Baird, declared.
Packer’s problem is that Crown has long enjoyed the lion’s share of the VIP high-roller market but the Star, having just splashed $850 million on upgrades, buying jets and the like, has become a serious competitive threat.
Already, high-roller growth at the Star is running at double the growth of Crown. Sydney is a superior tourist destination to Melbourne. So, keeping the pressure on Echo, which owns the Star, is a good default option for Packer if he can’t swing Barangaroo. He should at the least be able to have the 10 per cent shareholder limit scrapped.
To generate a return on his mooted $1 billion to $1.5 billion investment, however, he will need a low tax rate, and he will need pokies. Together, Australian casinos generate just $170 million in VIP earnings (before interest, tax, depreciation and amortisation).
This story, and the heat on rival Echo, has only just begun. Events of the past week show James Packer is a chip off the old block when it comes to holding sway over press and politicians.
In fact, he should have gone for the doctor and announced he was refurbishing that tired old Opera House. It’s wasted space, let’s face it.
What’s a bunch of old songs and plays and stuff when you could deck the joint out with blackjack tables and giant TV screens showing rugby league?