Four Facets of the Crown Resorts’ New Conditional Planning Approval

 
Crown Resorts Ltd (ASX: CWN) lately announced that the New South Wales Planning and Assessment Commission has approved the applications for modification of the approved concept plan for Barangaroo (known as Mod 8) and for the construction of the Crown Sydney Hotel Resort at Barangaroo South. The approval is subject to a number of substantial modifications and conditions.
 
Adds to tourism infrastructure: Chairman Robert Rankin said that though it has been a long and detailed process, the company is pleased with the overall outcome and is deeply committed to building a six-star hotel resort. For too long, Sydney has suffered from a lack of luxury tourist accommodation and Crown Sydney will help to turn that around. The company will now move quickly to begin excavation work and is expecting to complete construction and open in early 2021. The company’s CEO Rowen Craigie said that the company is pleased that the NSW Planning and Assessment Commission has given a go-ahead for a significant piece of tourism infrastructure.
 
New Casino and concessions made: The resort is to be located on the waterfront of the most populous city in Australia, Sydney and will cost an estimated $ 2 billion. The new resort, expected to open in 2021, will be the second casino in the city with the site being located 1 km from the Echo Entertainment Group's Star Casino. The process of planning and appeals for the new casino has proved difficult with several concessions having to be made by Crown including the provision of public access to an observation deck on the 65^th floor of the casino tower and setting back the casino 30m from the water to address concerns about public access. The casino in Sydney will be a wholly owned resort in Australia after the Crown Melbourne Entertainment Complex and the Crown Perth Entertainment Complex.
 
Provision of Gaming facility: The assessment of the Department of Planning and Environment on the scheme confirms the project as having a gaming facility of 6085 m² (65,498 ft.²) and a 71 story tower with 14 and three basement levels, providing a gross floor area of 77,500 m², including a hotel of 350 rooms and 66 residential apartments.
 
Mixed market sentiments: On one hand, the share price for CWN recovered 2.89% in last one month (as at July 06, 2016) based on the above and the recent announcement of demerging the Australian operations from international business; however, few brokers and analysts (including Deutsche Bank) have laid down their negative sentiments with regard to the approval considering the project is expected to generate earnings before interest, tax depreciation and amortization of A$98 million-A$157 million in its first full year (probably FY22) with a low pre-tax return on capital of 2.1%-6.0%. Protesters against local lockout laws have also come forward demonstrating views over Barangaroo development.
 
Amidst the challenges, it will be crucial to see CWN’s strategy towards growth. It is further said that if CWN is successful in its proposed IPO then the financial leverage may improve and fund the new Casino.