Star exits Queen’s Wharf in latest attempt to right the ship

Star Entertainment has taken a significant step on March 7 by announcing the decision to divest its stake in the Queen’s Wharf Brisbane joint venture. As part of a strategic consolidation effort aimed at mitigating financial distress, the company will also enhance its ownership stake in the Gold Coast property.

In a formal announcement filed with the Australian Securities Exchange (ASX), Star confirmed the sale of its 50% interest in Queen’s Wharf back to its partners, Chow Tai Fook (CTF) and Far East Consortium (FEC). The total transaction value is set at AU$53 million (approximately £25.8 million/€30.8 million/US$33.4 million), with an upfront payment of AU$35 million.

Moreover, an additional AU$10 million payment is scheduled by the month’s end, with the remaining AU$8 million either due by November 30 or upon the completion of the Andaz hotel tower at Star’s Gold Coast property, whichever arrives first.

This strategic divestment allows Star to extricate itself from any further financial liabilities associated with the Queen’s Wharf project, where future investments were projected to exceed AU$212 million. Notably, the company has also been released from the parent company guarantee tied to its 50% share of the project’s debt, which currently stands at AU$1.4 billion.

While the original casino management agreement for the Queen’s Wharf project has been terminated, Star will maintain its operational role until March 2026, rendering an interim fee of AU$5 million per month. Should this transitional agreement extend, the monthly remuneration will increase to AU$6 million.

A Disappointing Exit from a Promising Development

Star’s decision to exit Queen’s Wharf marks a pivotal moment as the company grapples with financial instability. The project has faced extensive delays and its costs have soared to AU$3.6 billion. Despite these challenges, Queen’s Wharf was anticipated to be a cornerstone of Star’s future growth, with the mixed-use development’s first phase having opened last August.

“This transaction represents a key milestone toward achieving financial viability,” stated Star CEO Steve McCann. “We are thankful for the dedication demonstrated by our staff in delivering The Star Brisbane and creating a new precinct in Brisbane.”

However, while this deal has been finalized, final approval from state regulators is still pending. CTF has previously come under scrutiny concerning its connections to junket operator Suncity Group, whose founder currently serves an 18-year sentence in Macau for illegal gambling activities, raising concerns regarding CTF’s expanded role in this pivotal development.

Star to Consolidate Gold Coast Ownership

Alongside this transaction, Star will acquire CTF and FEC’s interests in several non-gaming assets at the Star Gold Coast, which include the 313-room Dorsett hotel tower and the under-construction 202-room Andaz tower. Effectively, Star is pivoting its business strategy to focus on the opportunities presented by the Gold Coast, asserting that this alignment will enhance their customer offerings and diversify the hospitality portfolio.

Star also retains rights to future developments on the 6.7-hectare site, which possesses freehold title and existing plans for up to three additional towers. Although CTF and FEC will maintain development rights to the next tower, Star retains the option to purchase these rights for AU$17 million.

As part of the strategic exit from Queen’s Wharf, Star has also agreed to relinquish control of its Treasury Hotel building and its associated garage to CTF and FEC. In a previous transaction, Star sold the casino building on the site to Griffith University for AU$67.5 million, thereby fully divesting from its Brisbane assets.

“We are enthusiastic about our future in the Gold Coast,” McCann remarked. “Following the anticipated opening of the 5-star Andaz Hotel in late 2025, we will offer nearly 1,200 hotel rooms, positioning us to enhance our integrated offerings and improve overall business performance.”

New Loan and Potential Financing Deal

Additionally, on the same day, Star announced the acquisition of a AU$250 million bridge facility from US-based King Street Capital Management. This facility is available for withdrawal until April 29, contingent upon meeting specific conditions.

These conditions encompass securing an intercreditor agreement with existing lenders and procuring the necessary probity approvals to grant first-ranking security over The Star Gold Coast and its associated assets. Furthermore, a non-binding refinancing proposal from an undisclosed lender could potentially grant Star a total debt capacity of up to AU$940 million, but its implementation remains uncertain.

In a previous announcement, Star confirmed an approach regarding a AU$650 million debt financing proposal from Oaktree Capital; however, conditions for that proposal have yet to be fulfilled.

Uncertain Outlook for Star’s Future

From a high-level perspective, Star’s future remains precarious as it seeks to navigate through a landscape fraught with challenges. Currently, the company’s shares remain suspended from trading due to delayed earnings submissions.

A significant question hangs over its ability to regain control of its Star Sydney casino license, which has been scrutinized via two separate suitability inquiries, resulting in unfavorable outcomes. Should state regulators determine the casino to be unsuitable in a forthcoming ruling after March 31, the license could be revoked entirely. As a consequence of these inquiries, Star has already disposed of its event center for AU$60 million.

Ongoing investigations by Austrac, Australia’s financial crime watchdog, could also lead to substantial fines, adding to the company’s turmoil. The potential for corporate acquisition looms as well, with interest reportedly coming from U.S. operator Bally’s Corp., who had recently sent officials to engage with Star and explore its properties.

McCann cautioned that the company must navigate various risks, including securing funding, achieving compliance with licensing standards, maintaining stakeholder support, and dealing with ongoing litigation and historical business issues, all while grappling with a period of declining revenue and negative cash flow.