If I may be slightly political for a moment for this post - I hardly ever am (yeah right!)So Mike Lee and his lefty cronies on the Auckland Council want to put the kibosh on a convention centre and development by Sky City Entertainment Group Ltd [SKC.NZX] where they will spend more than $10 million of shareholder money improving streets around their complex.
You would have to ask yourself why Mike and his mates would want to stall the development of a business that provides millions in rates and employs thousands and would employ more with an approved development.
The obvious one that sticks out like a hammer and sickle on a red flag is that the Auckland Council is inherently left and aligned to the Labour Party and they hate development, especially that of a casino.
We wont look at that here though.
The most relevant reason for Mike Lee and his council denying Sky City the right to develop their land and business is that Auckland City Council have a proposal of their own to develop a Council owned, operated and funded convention centre that competes directly with the Sky City development. This is of course public knowledge but wasn't brought up by councilors at planning meetings for the Sky City development or reported in the media over the last few days.
This means that the Auckland ratepayer would fund the bulk of the convention centres development and ongoing running costs.
The cost is in the multi 10s of millions of dollars and the ratepayer will be saddled with debt for generations as convention centres do not make money. Councilors will tell you otherwise but there is no evidence for this at all:
From my peice last year on the Sky City Convention Centre:
"The center was promised to bring out-of-towners who stayed in hotels and spent money," said Heywood Sanders of the University of Texas at San Antonio, who studies the performance of convention centers and is a longtime critic of such publicly financed projects. "They routinely overpromise, and they never do what they're supposed to do. The question is how badly they perform. Putting in a hotel is no guarantee that it will improve the center's performance."
Washington Post: Heywood Sanders of the University of Texas at San Antonio - Researcher of Convention Centre performance.
Ongoing costs will be clearly crippling to Auckland city ratepayers.
Councilors at least need to declare their conflict of interest over this one and decisions being made over the Sky City Convention Centre proposal must be and must also been seen to be seperate from decisions being made over the councils own proposal.
It is not clear at all as to whether individuals on council are making decisions over both proposals and this is obviously an unacceptable practice if it is happening.
Disc I own SKC shares in the Share Investor Portfolio
Sky City Convention Centre @ Share Investor
Share Investor discusses Convention Centre proposal with CEO Nigel Morrison
Sky City Convention Centre Expansion a Money Loser: Part Two
Sky City Convention Centre Expansion a Money loser
SKC Convention Centre power-point slide illustrations & SKC submission to Auckland City Council
Sky City Entertainment Group @ Share Investor
Guest Post - Michele Hewitson Interview: Nigel Morrison
Failed Sky City bid for Christchurch Casino good news for Shareholders
Sky City Entertainment Group Ltd: Christchurch Casino bid falls short of Investment Criteria
Sky City Entertainment Group Ltd: Never mind the width feel the volume
Sky City Annual Meeting & 2011 - 2012 Profit Forecast
Stock of the Week: Sky City Entertainment Group Ltd
Sky City set to lose National Convention Centre bid
Sky City Entertainment Group: Australian Acquisition on the Cards?
Sky City Entertainment Group Ltd: 2010 Full Year Profit Analysis
Sky City Entertainment Group 2010 Full Year Profit Preview
Chart of the Week: Sky City Entertainment Group Ltd
Share Investor discusses Convention Centre proposal with CEO Nigel Morrison
Share Investor Q & A: Sky City CEO, Nigel Morrison
Sky City Entertainment: CEO Nigel Morrison discusses 2010 HY
Sky City Convention Centre Expansion a Money Loser: Part Two
Sky City Convention Centre Expansion a Money loser
Sky City Entertainment Group Ltd: Download full Company analysis
Sky City 2010 full year profit looking good
Long Term View: Sky City Entertainment Group Ltd
Sky City Entertainment: CEO Nigel Morrison discusses 2010 Half Year
Sky City Entertainment Group 2010 Interim Profit Review
Sky City to focus on Gaming
Sky City debts levels now more manageable
Insider Trading on Sky City shares
Sky City Profit Upgrade: Always on the Cards
Sky City's Current Cinema "Boom" a Horror Story in Disguise
Stock of the Week: Sky City Entertainment Group
Are Insiders selling Sky City Stock?
Sky City Entertainment 2009 Interim Result Preamble
2008 Sky City profit analysis
Sky City share offer confusing and unfair for smaller shareholders
Sky City Entertainment 2008 Full Year profit results , NZX release, 2008 full year presentation, result briefing webcast, financial statements
Sky City 2008 profit preamble
Sky City outlines a clear future plan
As recession bites Sky City bites back
Sky City Assets: Buy, sell and hold
Why did you buy that stock? [Sky City Entertainment]
Sky City Share Volumes set tongues wagging
Sky City half year exceptional on cost cutting
NZX Press release: Sky City profit to HY end Dec 2007
Sky City Cinemas no Blockbuster
Sky City Entertainment share price drop
New Broom set to sweep
Sky City Management: Blind, deaf and numb
Sky City sale could be off
Opposition to takeover
Premium for control
Sky City receives takeover bid
Sky City Casino Full Year Profit to June 30 2007
Setting the record straight
Sky City CEO resigns
Sky City Casino: Under performing
Sky City Casino 2007 HY Profit(analysis)
Sky City Casino 2007 HY Profit
Discuss SKC @ Share Investor Forum
Download SKC Company Reports
Recommended Amazon Reading
The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) by Benjamin Graham
Buy new: $14.95 / Used from: $6.99
Usually ships in 24 hours
c Share Investor 2011
interesting wording of what they want to do ...
ReplyDelete"improving streets around their complex."
SB, I would have thought the council would see sense in SKC spending money on improving Federal Street for the public in return for approving a development that will bring business and much needed jobs into Auckland.
ReplyDeleteSKC will be providing public spaces with bars and the like opening onto Federal St.
Probably a blessing in disguise for SKC. Looked like a lemon investment on their behalf.
ReplyDeleteThis comment has been removed by a blog administrator.
ReplyDeleteAnon, I questioned Nigel Morrison about that last year:
ReplyDeletehttp://shareinvestornz.blogspot.com/2010/06/share-investor-discusses-convention.html
He reckons the increased foot traffic into the casino because of the development and extra revenue from F & B would mean that there would be some good returns in it for them.
The Convention Centre is a means to an end for them. At best they will break even and at worst make a loss. They are counting on extra feet in the casino door to ameliorate that.