Star Entertainment to expand casino and hotel offerings through sale and leaseback of its $2.3 billion Pyrmont site Star Entertainment to expand casino and hotel offerings through sale and leaseback of its $2.3 billion Pyrmont site
Star Entertainment has plans to sell and leaseback a minority stake in its $2.3 billion Pyrmont site in Sydney’s darling harbour including three luxury hotels, gaming floors and a number of high-priced restaurants and retail.
In an exclusive interview with The Australian Star Entertainment Group chief financial officer Harry Theodore said, “We see the potential to unlock value from our property assets via a sale and leaseback or similar transaction.
“Transactions of this nature have become prevalent in the US casino market including some
large deals this year in Las Vegas,” he says.
“It demonstrates a strong appetite from property investors for prop co transactions.
“The Star has initiated a formal process to explore those same opportunities.”
A prop co refers to structures that separate real estate from the operating companies.
Several months ago, Star hired investment bank Credit to handle the sale and leaseback of a 49 per cent stake.
The initial deal would be for a 25–30-year term with a number of options in place.
It would also see Star continually invest capital in the Pyrmont infrastructure, which includes at lease six signature restaurants and 620 hotel rooms spread across three properties.
It is understood that the funds from the sale would be used by Star to expand its Pyrmont property, to pay down debt and to invest in other growth projects including a 1550 seat Broadway-style theatre and 1000-seat comedy and live entertainment theatres as part of a redevelopment of the Event Centre and run alongside The Lyric Theatre.
Talks are also taking place with the NSW government for the construction of two new hotel towers at the Pyrmont site, including a Ritz-Carlton hotel.
A formal process for the sale and leaseback on a minority stake holding of the property is already underway.
The vendor is expected to retain a 50 per cent interest.
“Flipping The Star Sydney into an OpCo/PropCo could realise $1.8- $2.6 billion in value and be worth 95c–$1.40 per share, with high sensitivity to the rent charge and cap-rate,” Macquarie Securities analysts David Fabris and Gabrielle Emerick wrote.
Irit Jackson, 7th October 2021
