It goes back to the drawing board confident it can still bank all of the valuable (and frankly undervalued) government gambling concessions that it was awarded after the "pokies for convention centre" deal was framed up in the first place by John Key and SkyCity notables.
Its prime business as a casino operator and major property player in Auckland is assured. This is where SkyCity will make most of its money. Not on the international convention centre itself, which while it will be subject to performance measures, will rely on a broader NZ government-funded marketing effort to help assure future business.
SkyCity - and Morrison in particular who has played an aggressive hand - have had a few knocks to their reputations.
But SkyCity's been there before. It goes with the casino space.
The Government is not a loser either.
But here's the caveat.
It doesn't have to reach into the taxpayers' pockets to bridge the cost escalations - between $70 million and $130 million - which SkyCity revealed to the market in December.
Joyce now realises that the taxpaying public will not tolerate any breach of the Prime Minister's promise that the convention centre would be "free" to the taxpayer.
But John Key has had a serious slap. He underestimated the public's tolerance to be politically played by him. For example his absurd comment suggesting any convention centre at the $402.3 million original price tag would be an "eyesore". And Key also underestimated the capacity of Finance Minister Bill English to apply some hard fiscal pushback when the latter was intent on finally getting to his Budget surplus target.
So where does it go from now?
Both Morrison and Joyce are now keen to play down any points of difference.
If Morrison had a minor licking at Saturday's meeting of the SkyCity board to approve the back-to-the-drawing-board approach, he's not showing it.
The SkyCity directors include some of NZ's toughest. They would easily have recognised that walking away wasn't an option when the Government had assured their future business through rolling over SkyCity's licence by legislation - not the usual approval processes - and expanding its gambling concessions.
Let's face it, those concessions are able to be leveraged once the final construction agreement is in place.
What is interesting is Morrison's admission that if the two parties had managed to reach agreement on the expanded convention centre option, which emerged after architects Warren and Mahoney got involved - and the Government had put some money in - "there's no doubt we [SkyCity] would have put more money in and maybe matched it".
Three major points to have emerged since the announcement:
SkyCity is still prepared to invest more than $402.3 million on the project subject to the board's final determination - if the cost escalation had been about $30 million, SkyCity probably would have swallowed it.
SkyCity is looking to finesse the convention centre's design without altering the scale too much; it went from 33,000sq m to 38,000sq m during the design process last year.
SkyCity believes it may still be able to ensure the final plenary and exhibition spaces stay relatively lineball with that outlined in its resource consent application to Auckland Council.
Where the going gets difficult - and could indeed result in some more tension points between SkyCity and the Government - is that the above three points are to a large degree dependent on ensuring the procurement process for the convention centre is expedited and that consents are quickly put in place.
Morrison notes that if a more private-sector approach is adopted to the procurement process - and that the consents move at speed - SkyCity might be able to get a "very keenly attuned" price from key construction firms which would get involved with the design process and "take some risk out".
This could leave the final investment to SkyCity in the "low $400s million" space but still result in an international class convention centre.
Joyce says the Government will not "call in" the consent process for the convention centre. SkyCity expects to hear from the council next month.
He also notes there are constraints at government level on the procurement process.
It is clear that the Government was involved behind scenes in the design process last year which led to the "gold-plating" of the project. And that Joyce felt he could probably sell a contribution from the taxpayer to the gold-plated option - even though that was the "least preferred option".
Morrison has also confirmed SkyCity has had approaches from Asian investors to fund and build the new hotel which will go up on former TVNZ land next to the convention centre. This also makes sense commercially because it limits SkyCity's overall capital outlay which otherwise would be running to about $600 million.
There have clearly been substantial changes to the Government's "free" deal with SkyCity during the past year - for instance the increased business from the new hotel on former TVNZ land was not in the original deal - which have not been quantified.
It would now make sense to bring in KordaMentha again to quantify the value of the Mark 2 deal - before it is finalised - so that the taxpayer knows exactly who gets what out of this very unusual dealing.
My second punt is that the casino operator will be an even bigger winner than from the Mark 1 deal.
