Shares of Australia-based Echo Entertainment Group Ltd rose to a record high on Tuesday morning after the firm fended off competition from billionaire James Packer’s Crown Resorts Ltd for the right to develop a multibillion-dollar casino resort in Queensland’s capital, Brisbane.
The stock rose as high as AUD5.07 (US$3.74) in Tuesday morning trading on the Australian Securities Exchange in Sydney, its highest level since a June 2011 initial public offering, according to Bloomberg data. By the close of Sydney trading, Echo’s stock had settled back to AUD4.87, a gain for the day of 0.62 percent.
“This project is potentially transformational for both Brisbane and Echo Entertainment,” Echo chairman, John O’Neill, said in a statement on Tuesday. “Our commitment to South East Queensland is evident in the scale and quality of what we’re proposing, including the relocation of our headquarters to Queensland at the appropriate time,” he added.
Queensland Premier Annastacia Palaszczuk announced on Monday that the consortium led by Echo had been awarded “preferred tenderer’’ status for the urban redevelopment scheme. The Destination Brisbane Consortium includes Hong Kong-based Chow Tai Fook Enterprises Ltd and Far East Consortium (Australia) Pty Ltd, a unit of Far East Consortium International Ltd.
The Australian firm will provide 50 percent of the casino resort’s capital costs and act as the gaming operator. The other two partners will each contribute 25 percent of the casino resort’s capital costs, and split 50-50 the capital costs of the residential component.
Echo will receive a fee for operating the integrated resort. Echo’s partners will receive fees for any VIP business that they directly refer to the casino, according to Tuesday’s statement.
Chow Tai Fook Enterprises is a privately held firm founded by Cheng Yu Tung, a long-standing investor in the parent company of Macau casino operator SJM Holdings Ltd. Far East Consortium International is a Hong Kong-listed conglomerate with property development, hospitality and car parking businesses in mainland China, Hong Kong, Malaysia, Singapore, Australia, New Zealand and the United Kingdom.
The project (pictured in a rendering) described by Echo as an “integrated resort” will have luxury hotels, including one under the Ritz-Carlton brand and one under the Rosewood brand; residential apartment towers; luxury shopping; and public spaces along the Queen’s Wharf dock area.
Echo chief executive Matt Bekier said the proposed development will be an asset for Queensland “that will compete with anything in Macau, Singapore or other destinations around the world”.
“We look forward to progressing a development of which the people of Brisbane will be immensely proud, and that will deliver substantial economic and other benefits for Queensland,” Mr Bekier added.
Construction of the resort is expected to start in early 2017 and the estimated completion date is 2022, the firm said in Tuesday’s statement. The company will also retain ownership, under a long-dated lease, of the buildings at Echo’s existing Brisbane gaming venue, Treasury Casino and Hotel.
Echo also operates The Star casino in Sydney, New South Wales and Jupiters Hotel and Casino on Queensland’s Gold Coast. Mr Bekier said the firm would be spending AUD345 million to redevelop Jupiters Hotel and Casino, including the construction of a new 17-storey hotel tower.
Deutsche Bank AG said Echo’s win would protect the company’s existing Brisbane business. It currently provides 19 percent of Echo’s earnings, Bloomberg reported. Mark Wilson, a Deutsche Bank analyst in Sydney, estimated in a Monday note that the Queen’s Wharf development could cost about AUD1.5 billion.
Echo hasn’t given any public commitment on the minimum amount of money to be invested in the Queen’s Wharf project. On Tuesday, the company said it expects to fund the project through existing and new debt facilities and cash flow generated by the business.
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