Star Entertainment Needs More Time, Money To Complete Queen’s Wharf Casino
Posted on: July 29, 2022, 07:23h.
Last updated on: July 29, 2022, 12:13h.
Australia’s ambitious Queen’s Wharf project in Brisbane is counting on Star Entertainment to give it a casino resort to improve its chances of success. The casino operator is currently developing the property, but is running into trouble with both time and money.
This past February, Star indicated that it expected to open the new resort sometime around the middle of next year. However, it said in a statement today that it’s going to need a few more months, and that it will be closer to the end of the year before everything is in place.
The resort is a massive undertaking and includes four towers, a retail space, restaurants, and more. There is also a sky deck that runs about 328 feet off the ground. Because of the magnitude of the project, combined with overly optimistic time lines, construction is taking longer than Star and its construction contractor, Multiplex, expected.
Star’s Queen’s Wharf development is part of a larger plan by Queensland to revitalize the area. When it’s ready, the resort will take the place of the operator’s Treasury Brisbane casino. However, there may be some obstacles standing in the way.
Currently, notices on the grounds of the project don’t indicate that Star will offer a casino – they only highlight the other amenities. Star is defending itself in Queensland, New South Wales (NSW) and other states over allegations it failed to comply with anti-money laundering and other policies.
NSW already concluded its inquiry, providing an initial assessment that Star is not worthy of holding a casino license. However, Queensland only recently began its scrutiny, and its finding may not be revealed until early next year.
Unforeseen issues during the complex construction, an unexpectedly high level of rain, and COVID-19 have resulted in delays in the project, which first began to appear on the horizon in 2019. It’s not surprising that an ambitious development such as this would require more time, as there are always factors that result in delays in planned time lines.
Just like time lines often change in big construction projects, so do costs. Star, in 2018, put a budget of AU$2.6 billion (US$1.82 billion) on the resort. However, according to the company’s announcement, it will now have to spend at least another 10% more.
The increase is the result of supply chain issues, higher-than-expected construction costs, and difficulty finding adequate labor. Just like with construction time lines, big projects almost never stay within their initial budgets.
In addition, Multiplex has delivered to Star invoices for additional costs that Star didn’t originally factor into the project. As a result, it and Multiplex are butting heads over who’s responsible for what.
Star’s Financial Rebound
Star isn’t expressing much concern over the rising costs. It’s beginning to see improved revenue, which can help offset the difference. From July 2021 to June 2022, it recorded normalized revenue of AU$1.53 billion (US$1.07 billion). While this is AU$30 million (US$21 million) less than a year earlier, the figure increased as the 12-month period advanced.
For the second quarter of this year, Star reported an increase in domestic revenue of 11% compared to the same quarter in 2019 before the arrival of COVID-19. Gaming machine revenue and non-gaming revenue jumped by 28% and 26%, respectively. Table gaming revenue remained flat, but is improving.
Fortunately for it, Star isn’t responsible for 100% of the costs. The Queen’s Wharf project is a joint venture that includes Far East Consortium and Chow Tai Fook. The two Hong Kong companies each own 25% of the development.
That partnership could eventually prove to be trouble for Star, however. Chow Tai Fook has ties to Henry Cheng, who controls 10% of SJM Holdings. He was blacklisted from working with Crown Resorts over alleged connections to organized crime several years ago.