- »Sydney Apartments Help Boost Crown’s Bottom Line
Sydney Apartments Help Boost Crown’s Bottom Line
A surge in Australian property prices has helped strengthen Crown Resorts’ balance sheet and allow it to push for a higher price from prospective takeover bidders, the Australian Financial Review reports.
Real estate agent Erin van Tiul has spent the past few years selling apartments in the Sydney Barangaroo casino tower that houses Crown’s hotel and still-to-be-opened casino and while Crown’s December-half results were consumed with the fallout from the NSW government’s reportmand the impact of coronavirus shutdowns, one of the few bright spots was the update on sales at the One Barangaroo residential project.
Crown said it had made more “good progress” on sales, with $870 million in gross sales and pre-sale commitments achieved to mid-February.
Such was the group’s confidence in how the apartments were selling, Crown bumped up its expected total receipts from the apartments from about $800 million to $1.1 billion.
Crown’s apartment sales windfall came amid a broader pick up in property prices that continue to amaze.
Sydney set a record for the most expensive apartment ever sold at auction last Saturday, when online gambling baron Joshua Chan paid $20.1 million for a penthouse at Bondi Beach.
Still, it’s worth noting that sales of the 82 residences at One Barangaroo started slowly; three years ago, only a quarter of the super expensive pads had been sold, including one to Packer, who paid $60 million for an apartment that took out a whole floor of the building.
But van Tuil clearly held her nerve, kept prices high and delivered the goods for Crown.
The better than anticipated apartment sales result does two things for Crown,
First, it cuts the total cost of the $2.2 billion project to a net figure of $1.1 billion.
Second, as the cash from settlements rolls in over the rest of calendar 2021 and Crown’s big investment in the Sydney casino comes to an end, the group’s debt will keep coming down.
Indeed, Macquarie tips net debt to fall from $1.3 billion at June 30 to $403 million by the end of financial year 2022 and to $25 million by the end of the 2023 financial year.
Thinking laterally and breaking broker consensus down further, Crown should switch to a net cash position by the end of calendar 2022 and that’s after paying $250 million in dividends.
To be effectively debt free in late 2022 or early 2023, as cash flow ramps back up in Melbourne and Perth after COVID-19 and Sydney is finally up and running, would only underscore Crown’s already strong balance sheet.
Some Crown investors argue that even in the absence of a takeover bid, the company’s improving debt position would have eventually seen its share price re-rate, particularly as dividend payments were restarted.
But with Crown now firmly in play, the debt issue will become a central plank in the push by the board and its banker to either get Blackstone to raise its $11.85-a-share offer or to extract a bigger deal from another suitor.
Crown receives takeover offer from Blackstone
Embattled casino operator Crown Resorts said it has received an unsolicited, non-binding and indicative takeover proposal from one of its major shareholders.
The Australian reported in March that US private equity giant Blackstone Group’s offer is worth $11.85 cash per share, a premium of 19 per cent to the average price of Crown shares since the release of its first half results.
The offer, which is conditional on regulatory confirmation that a Blackstone-owned Crown is considered suitable to own and operate the Sydney, Melbourne and Perth casino licences, values the embattled casino giant at $8.02 billion.
Crown’s consideration of the officer comes as chairman Helen Coonan is deep in the middle of a major rehabilitation of the company following the damning findings of the Bergin inquiry into Crown by the NSW Liquor and Gaming Authority.
A royal commission into Crown called by the Victorian government and led by former judge Ray Finkelstein is scheduled to begin this week.
The West Australian government is also poised to commence its own royal commission investigation into Crown in the wake of the Bergin findings.
James Packer has indicated he is a willing seller of his stake in Crown after offloading part of his stake to Melco Resorts in 2020 and negotiating with US casino giant Wynn Resorts in 2019 for a potential takeover of the company.
That offer was rebuffed by the Crown board.