Australia’s Star Entertainment Group has initiated a plan to sell and leaseback a 49% stake in its flagship integrated resort, The Star Sydney.
According to a report by The Australian, the sale and leaseback option – which is reminiscent of the “asset light” strategy recently pursued by US casino giant MGM Resorts – would see Star retain a majority 51% stake in its Sydney property while paying around AU$120 million to AU$130 million (US$88 million to US$95 million) in rent annually to the new owner of the remaining 49%.
The plan is seen as a means of raising additional capital to fund its Sydney expansion plans, which include development of a luxury Ritz-Carlton hotel tower and potential purchase of 1,000 new gaming machine licenses.
Star has reportedly hired Credit Suisse to oversee the process.
The company’s Chief Financial Officer, Harry Theodore, told The Australian, “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. It demonstrates a strong appetite from property investors for prop co transactions.
“The Star has initiated a formal process to explore those same opportunities.”
Star had previously hinted at potential sale and leaseback opportunities when it submitted a proposal to merge with the other major player in Australia’s casino market, Crown Resorts, in May. The company later withdrew its proposal due to uncertainty around Crown’s future pending the outcome of a Royal Commission into Crown Melbourne’s suitability to retain a casino license.
The recommendations of that Royal Commission are due to be handed down this week, however Star has stated the door remains open to revisiting a merger should Crown either retain its Melbourne license and be offered a path back to suitability, as was the case with its Crown Sydney development.
US hedge fund giant The Blackstone Group has also been named as a potential suitor to acquire the 49% stake Star is currently offering. Blackstone already holds a 9.99% interest in Crown it acquired from Macau’s Melco Resorts last year and has recently been involved with sale and leaseback deals for Las Vegas icons MGM Grand and the Bellagio, among others.