Australia – Deutsche Bank backs Echo’s bid in BrisbaneBy Lewis - 22 July 2014
Analysts at Deutsche Bank believe that Crown Resorts may struggle to show it can justify its proposed casino investment at the Queens Wharf precinct in the Brisbane CBD after bringing in a major Chinese developer as its joint venture bidder.
James Packer’s Crown announced on Friday that it would join forces with China’s Greenland Holding Group to bid for the project, with Crown to operate the casino and Greenland to take on most of the development risk. However, Deutsche Bank has stated that rival Echo Entertainment is better positioned to win the tender, given that it already has a casino licence in the city. Echo runs the Treasury Casino & Hotel, which is in a heritage-listed building close to the Queens Wharf precinct (pictured). Echo is bidding for the development in a joint venture with Hong Kong’s Chow Tai Fook and Far East Consortium, creating the Destination Brisbane Consortium.
Chow Tai Fook Enterprises and Far East Consortium that will see Echo contribute 50 per cent of the capital to the development of the project under a long-dated gaming operator agreement. CTF and FEC would then contribute 25 per cent each, and will also jointly take on the residential and “related” component of the broader Queen’s Street Wharf project.
It is expected the development will have a $1bn project cost.
“We struggle to see how Crown would be able to generate a return above its cost of capital in this relatively thin and saturated casino gambling market and we believe Echo remains better positioned to win the licence given its existing Brisbane licence,” stated Deutsche Bank in a note to investors.
If Echo wins the Queens Wharf tender the group will move the casino and transform the Treasury Building into a retail precinct. But if Crown wins the tender, Echo will probably hold the Treasury Building as a casino and compete directly with Crown, which could affect the revenues of both casinos.