Embattled Australian gaming operator The Star has gained a slight reprieve, as proposed increases to casino taxation rates in the state of New South Wales have been delayed by the state government. But the group has suffered a different financial setback, as the proposed $168 million sale of its Treasury Casino and Hotel has fallen through.
The company made both statements within an hour of each other on Tuesday.
Regarding the casino tax rate increase, proposed last December ahead of elections and initially set to come into effect on July 1st, the group’s CEO, Robbie Cooke reiterated the stance that the increase is “ill-conceived”.
The group had estimated that the tax increase could cost it some $1.11 billion, when combined with its ongoing legal woes and possible fines.
The Star had initially lamented that the industry was not consulted ahead of the proposal, calling it ‘not sustainable’ and ‘flawed’. However, authorities have since engaged with The Star to seek its opinion on the matter, prompting authorities to delay the legislation until after the Parliamentary winter recess.
The Star had previously been engaged in a “poker game fraught with risk”, over the tax rate increase, gaming consultant Ben Lee told AGB at the time. The company announced that it was laying off some 500 full-time staff and freezing salaries as a way to reduce costs amidst a ‘rapid deterioration in operating conditions’.
These, it specified, included ‘the compounding impact of regulatory operating restrictions and exclusions, and by an emerging weakness in consumer discretionary spending behavior’.
In its latest statement, The Star’s CEO says that “If implemented as originally proposed, the additional duty would significantly challenge the economic viability of the Sydney business and put the jobs of up to 4,000 hard working Sydney employees in jeopardy.”
The group also makes note of its ongoing process to refinance its debt, noting that ‘ongoing uncertainty and the prospect of increased casino duty rates in NSW materially increases the risk of not successfully completing these processes.’
The New South Wales Treasurer says that the delay in implementation of the tax hike will ‘permit these conversations [with casino operators] to continue,’ but did not indicate it was going to shelve plans for the hike entirely.
It remains to be seen how the conversations will progress and what further leverage The Star intends to use to argue its position.
Treasury Casino and Hotel sale falls through
At the same time, the company has informed that the deal to sell buildings comprising its Treasury Casino and Hotel property in Brisbane to integrated property group Charter Hall has fallen through.
The AU248 million ($168.7 million) sale and lease accord would have encompassed the Treasury buildings as well as the supporting Queens Gardens Car Park.
Star Entertainment had announced the deal in October of 2021 AU$ 248 million (168.7 million), with the intention to lease back the facilities for an initial term of 30 years. The group was intending to continue operating the Treasury Casino until it had opened its Queen’s Wharf Brisbane project, afterwards shifting operations over to the new multi-billion-dollar venue. This was deemed part of its strategy to let go of non-core or low-yielding assets.
The Tuesday filing indicates that Charter Hall ‘no longer intends to proceed with the proposed transaction’, refusing to prolong dates set out under the initial contract for which The Star had to fulfill certain conditions.
The conditions included ‘State consent’. The Star notes that ‘the conditions have not been satisfied by the relevant date’.
The sale marks a further thorn in The Star’s financial side, which it aims to painstakingly remove through refinancing, including millions from its partners in the Queen’s Wharf Brisbane project (previously estimated to cost some $2.37 billion, of which $1.71 billion involves the integrated resort). The Star is half-owner of the project alongside Hong Kong Stock Exchange-listed Chow Tai Fook and Far East Consortium.
The group has also put up its Sheraton Grand Mirage property on the market for AU$200 million ($135.4 million), but has not yet announced any deals signed for the disposal of the asset.
Meanwhile, Queen’s Wharf Brisbane has seen its opening date pushed back by four months, now expected to only open in April of 2024.
According to its most recent financial reports, The Star reported a 1H23 loss of $861 million.