PR disaster blows up the Government’s tax plans, the housing market downturn accelerates and a break in royal tradition as the Queen prepares to appoint the new British Prime Minister in the latest New Zealand Herald headlines. Video / NZ Herald
SkyCity's $220 million deal to offload its car parks to investment giant Macquarie is in jeopardy with the entertainment group unlikely to meet an October 22 deadline to hand over the assets due to fire damage.
And the situation is already creating a financial burden for SkyCity because it ishaving to make payments to compensate Macquarie for car parks not already made available under the concession agreement.
Macquarie bought a long-term concession over about 3000 car park spaces on the SkyCity Auckland main site and the NZICC site in April 2019, just months before a fire engulfed the roof of the convention centre construction site and raged for several days.
SkyCity's annual report published last week noted that Macquarie has an option to terminate the agreement if SkyCity is unable to hand over the car parks on the NZICC site by October 22 this year due to the damage caused by the fire.
SkyCity is due to deliver the carparks by October 22. Photo / Janna Dixon
"In the event Macquarie chooses to exercise this option, this would result in the Car Park Concession Agreement being terminated and SkyCity taking back the operation of all of the car parks," it said.
The report also notes the company is required to make compensation payments to Macquarie for car parks not already made available. The amount paid is not clear, but SkyCity does record in its annual accounts an insurance receivable of $10.75m in relation to the insurer's "partial payment" of compensation to Macquarie.
At a briefing to investors last week SkyCity chief financial officer Julie Amey confirmed the deal to offload its Auckland car parks to Macquarie might not go ahead and the company might have to buy back the assets.
SkyCity was progressing credible options for financing a potential buyback should Macquarie exercise its right, she conceded, and this could entail borrowing funds.
Last week, SkyCity met dampened expectations, reporting a $33.6m loss for 2022 on the back of an extended lockdown in Auckland where its flagship facility is based.
Asked if the car parking sale was at risk, a company spokesperson told the Herald: "We can only refer you to information already released via our financial statements and investor presentation, such as the contingencies section."
Firefighters on the third day of the blaze in October 2019. Photo / Dean Purcell
But Amey's statements last week went further.
"As highlighted in our interim financial statements, we continue to work with Macquarie on the late delivery of the car parks that were compromised as a result of the NZICC fire back in 2019 and while reinstatement of the car parks is underway it is likely they will not be delivered to Macquarie on time.
"There is a comprehensive disclosure in our financial statements but I do want to call out that this late delivery could give rise to a contractual right on October 22 which allows Macquarie to exercise their right to terminate the concession agreement.
"If Macquarie does decide to exercise their right to terminate this will ultimately result in us taking back operational control of all of the car parks covered by the concession agreement. This will be for a consideration to be determined by a process as detailed in the agreements," Amey told shareholders last week.
So far, Macquarie had not indicated its intentions, she said, going on to stress what a good earner the parking business was for SkyCity. The Auckland car park business was a high-quality, integrated operating asset that is a key driver for local gaming visitation with earnings of $15m to $20m ebitda per annum, she said.
"So, while a car park buyback is not part of our current discretionary capital strategy, it is a valuable asset with strong earnings," she told investors.
SkyCity was progressing credible options for financing a potential buyback should Macquarie exercise its rights, she said.
"These options range from viable self-help using existing resources through to securing new debt that fits within our longer-term capital management strategy," Amey told shareholders.
Firefighters battle in October 2019 above the Albion Hotel. Photo / Paul Murtagh
SkyCity's annual report records an interest-bearing liability of $49.2 million relating to the main site nested car parks.
It also notes an estimated net loss of $33.3 million post-tax arising from impacts of the NZICC fire, which includes recoveries of compensation payments made to Macquarie for car parks compromised by reinstatement of the NZICC and Horizon Hotel.
"The Group will also seek recovery from the Contractor for additional costs and losses associated with the NZICC fire that are not covered by the insurers. These include insurance excesses, payments to Macquarie under the Car Park Concession Agreement, additional project costs, and other items."
SkyCity also recognised a liability to reconstruct assets associated with an initial 600 NZICC car parks that were required to be provided to Macquarie. This it estimates at $30.5m.
"The ultimate cost for reconstructing these assets may differ materially from this assessment once detailed planning is completed and the actual extent of the damage is known," the annual report said.
