Star had agreed to offload its holding in the Queen’s Wharf development for AU$34 million.
Australia’s Star Entertainment Group is set to retain its 50% holding in the Queen’s Wharf Brisbane development after its Hong Kong-based joint venture partners pulled the plug on their proposed acquisition of the stake.
Star announced plans to exit the joint venture in March this year. It had been agreed that its partners – Far East Consortium and Chow Tai Fook Enterprises – would acquire its holding for AU$53 million (US$34 million).
As part of the same agreement, the partners also relinquished stakes in another venture, Star Gold Coast, back to Star. Effectively, this would have seen Star divest one casino and consolidate full ownership of another.
However, doubts over the agreement came to light in June, with reports that the partners were ready to walk away. This came after all parties failed to meet a deadline to complete the transaction. This was then extended to 31 July in the hope of resolving the sale.
Star proposed a further extension to 6 August, saying talks were still ongoing over a possible resolution. However, this was rejected by its partners, meaning that the Heads of Agreement (HoA) has now officially fallen through.
What does this mean for Star?
Failure to complete the stake sale has resulted in several consequences for Star.
It will retain Queen’s Wharf Brisbane stake and its one-third interest in a separate development on the Gold Coast. It will also retain its Treasury Brisbane hotel and car park and a 50% equity interest in Charlotte Street Car Park.
On top of this, it must repay $10 million of proceeds it received from the venture partners by 6 August. Star must also reimburse its partners for its share of equity contributions they made since 31 March. This is anticipated to be approximately $31 million and is payable by 5 September.
Should Star not make these payments, it will be required to transfer its one-third interest in Tower 1 Hotel at the Gold Coast to the venture partners.
At the same time, the partners must reimburse Star for their share of equity contributions made by Star to the Gold Coast development since 7 March. This is expected to amount to $1 million.
Other aspects include Star’s 50% share of the debt facility for Queen’s Wharf remaining. In total, this facility is worth approximately $1.4 billion. Star will also be responsible for its share of future equity contributions to the development, estimated at $200 million.
The original casino management agreement for Star Brisbane remains in place, with Star to continue as operator of the venue. In addition, a $35 million prepayment to Star for its share and net proceeds from the sale of apartments at Queen’s Wharf will not be impacted by the termination.
Could there still be a resolution over Queen’s Wharf?
While the HoA termination will come as a blow to Star, the operator hinted that all may not be lost. It said it will continue discussion with partners outside the HoA in an effort to find an alternate resolution.
“Star is continuing to engage with partners and will provide an update if there are any material developments regarding the parties’ respective interests,” Star said.
“Given the termination of the HoA, Star is considering what alternative options may be available to it in relation to its 50% equity interest in DBC, along with the Treasury Brisbane hotel and car park and its 50% equity interest in the Charlotte Street Car Park.”
