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Luxury apartments by Crown hit a roadblock

Thu, Apr 11, 9:07am by Staff Writer

Crown Resorts’ luxury apartment developments in Sydney and Melbourne have both hit roadblocks, amid planning problems and a housing downturn, the Australian Financial Review reports.

Last Tuesday, Australia’s biggest casino company fielded a takeover offer from Las Vegas giant Wynn Resorts, valuing the company at $10 billion.

The bid comes at a time when both VIP spending at its Melbourne and Perth casinos has slowed and questions surround the viability of its Sydney and Melbourne apartment projects.

In Sydney, Crown and Lendlease have been embroiled in a long battle with the Barangaroo Development Authority over blocked views at their projects in Barangaroo, caused by the authority’s new project, Barangaroo Central.

While Crown and Lendlease were early winners in the case that will likely force BDA to lower tower heights, BDA is appealing the decision in August.

A successful appeal could mean blocked views of Sydney harbor and a likely fall in apartment values at Crown’s One Barangaroo hotel/apartment tower and Lendlease’s apartment buildings, which flank One Barangaroo.

Despite the appeal, Crown is forging on with construction of the casino, hotel and apartments and has completed its podium, hotel floors up to level 23 and is set to start construction of its 6-star apartments at level 33 in July.

The hotel is expected to top out by Easter, while the whole project is on track to finish in 2021, Crown says.

While construction has been steady, details of sales of the apartments at the tower are unclear.

Crown has never launched a sale of the units, choosing to sell them privately to “family and friends”.

It is understood Crown Resorts has only sold a quarter of the 82 apartments, which are priced from $9.5 million.

“While we cannot disclose sales figures, I can tell you that interest to date has been strong. Crown Residences at One Barangaroo has received a very warm welcome from both Australian and offshore purchasers alike since sales commenced,” Crown Residences at One Barangaroo partner Erin van Tuil said.

Crown’s executive chairman John Alexander spoke about the matter to the Herald stating that: “Chinese people, like Australian people, are suddenly feeling a bit poorer than they were a couple of years ago. It all goes to spending patterns.”

Operators feeling the pinch

Gambling operators around the globe have been feeling the pinch, with lucrative high roller programs more uncertain than ever.

Chinese punters typically play baccarat and can turn over hundreds of thousands of dollars a hand and millions of dollars an hour.

This softening economic growth coupled with the Chinese government’s crackdown on shady consumption, as well as trade tensions with the United States go some way to explaining the reduction in wealth Chinese gamblers visiting Australia.

Crown told its investors last Wednesday that turnover from its VIP program had shrunk 12.2 per cent to $19.9 billion, driving down company profits over the final six months of 2018.

At Crown’s flagship casino in Melbourne, turnover was down 11.2 per cent to $17.3 billion.

The company’s after-tax profit had risen less than 1 per cent to $194.1 million, short of forecasts by Macquarie Research ($203 million) and JPMorgan ($221 million).

Billed as a VIP-only casino and due to completion in 2021, Crown’s new high-end, $2 billion residential and casino complex under construction in Barangaroo will be closely tied to an ‘international VIP program’.

The volume of high roller gamblers coming to Australian casinos has dropped since 2016-17 after the Chinese government embarked on an anti-gambling crackdown, jailing 19 Crown staff for illegal marketing activities on the Chinese mainland.

“The Australian VIP market recovery has potentially stalled. Now you have a macro headwind providing a bit of conservatism for material growth,” JP Morgan’s gaming analyst Donald Carducci said.

“It makes the business case for Barangaroo less attractive.”

The market consensus is that Crown’s newest venture in Sydney will feature 125 VIP gaming tables.

Analysts believe that if each table at Crown Sydney can generate $2 million, the casino will generate an uplift of $250 million a year.

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