Adelaide all go for SkyCity

Property Editor·NZ Herald·

19 Dec, 2012 04:30 PM3 mins to read

An artist's impression of the proposed centre in Adelaide Photo / Steven McNicholl

Green light in South Australia as Auckland convention centre suffers more delays.

SkyCity Entertainment Group says it is ready to cope with $725 million worth of development work if it gets the green light for a proposed Auckland convention centre, after yesterday revealing plans for a vast Adelaide expansion.

Chief executive Nigel Morrison said the company's balance sheet was well able to withstand twin simultaneous developments in Auckland of $350 million and Adelaide of $375 million because debt was relatively low and international banking credit lines were strong.

"We would have to borrow more to do both, but our balance sheet is under-geared at this point," Morrison said from Australia, referring to secure United States, Australian and New Zealand borrowing channels.

Both developments could be funded internally with no need for a capital-raising via any new shares, he said.

Issuing scrip to fund development work was a move he described as "the last thing I'd want to do", reaffirming the strength of SkyCity's balance sheet and borrowing capacity.

SkyCity also announced late yesterday that it has sold its 50 per cent share in Christchurch Casino to co-owner Skyline Enterprises for $80 million and has bought Skyline's 40 per cent share in Queenstown Casino for $5 million.

The gaming giant's Auckland plans got another setback this week, while its Adelaide push got the green light leaving the investment community more enthusiastic about Australia.

The Auditor-General's report into the Government's handling of the international convention centre deal in exchange for more gaming machines here has been further delayed until next year.

After 2 years of negotiations with the South Australian Government, Morrison said yesterday, the business had committed to a A$300 million redevelopment of the existing Adelaide property into an integrated entertainment complex.

Graeme Ramsey, Problem Gambling Foundation chief executive, raised concerns about the project in Adelaide.

"SkyCity are unable to expand their casino operations in New Zealand so it's no surprise that they're looking to other jurisdictions," he said.

Morrison sounded downbeat on Auckland but upbeat on Adelaide: "We've not got a deal on Auckland right now. We don't have anything. But Adelaide will start next year and it's a win-win for both parties."

Shane Solly of Auckland-based institutional investor Mint Asset Management praised the Adelaide deal, saying SkyCity had achieved its objectives there.

"This is a positive outcome. Some concessions have been made but this firmly positions SkyCity's Adelaide asset and provides attractive medium-term growth for investors with shares in the business," he said.

Mark Lister, of Craigs Investment Partners, said the deal gave the market clarity.

"It removes a bit of the uncertainty and speculation for that property."

Shares closed up 17c at $3.79.

Adelaide deal

SkyCity gets:

* Better operating, regulatory and tax environment.

* Extension of gaming exclusivity provisions to 2035.

* Electronic gaming machines go from 505 up to 1500.

* Table numbers go from 90 up to 200.

* Includes 300 automated table game terminals.

* Able to install cashless gaming technology.

* Able to offer more VIP gaming facilities.