Sky City to pay for National Convention Centre

Sky City Entertainment Group Ltd [SKC.NZX] has just been announced as the preferred bidder for the New Zealand National Convention Centre.

This will cost approximately $350 million to be funded by Sky City.

The funding for the centre comes with a negotiation over gaming rules so that the company can expand their gaming offers at their Auckland Casino, something that has been previously barred by legislation. Previously the bulk of the funding would have come from the taxpayer in the Sky City Convention Centre proposal but in return for shareholders funding the loss making centre CEO Nigel Morrison clearly would like some payback for his generous gift.

News reports on Sky City winning the bid have left out detail about previous bidders all relying on the taxpayer subsidy - including the Auckland City Council proposal - so those that are ill-informed or playing politics about yesterdays news might think or give the impression that Sky City are getting a special favour from Government for them to even consider changing gaming laws.

Now clearly Sky City could be set to benefit - although that is not a given - from the extra foot traffic the convention centre brings into the casino proper but given the tough economic conditions the world and country is facing the taxpayer should not look the Sky City gift horse in the mouth.

As I said above politics is already playing a part in this with the Labour opposition making a comment yesterday and local politics will come into play as well, even though the left-wing Mayor is backing the proposal several members of the council have made recent public comments about their opposition to the casino expanding any part of their business.

The council had their own convention centre proposal and of course must rubber stamp any expansion to the Sky City Auckland site and I see some very strident opposition coming from various members of council that may see it scaled back or changed some way and certainly any expansion of the gaming floor will be checked at every point.

This is an exciting proposal for the city of Auckland, it will provide jobs and add value to businesses all around the CBD and possible value to shareholders if the company negotiates a good relaxation of gaming rules.


Disc: I own SKC shares in the Share Investor Portfolio


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