Star seeks compensation over Queen’s Wharf luxury precinct

Queen’s Wharf is claiming millions of dollars in lost rent from Louis Vuitton-controlled DFS Group after plans for a retail precinct fell through.

Queen's Wharf’s opened earlier this month in Brisbane.

Star Entertainment Group’s Queen’s Wharf is counter suing for millions of dollars in lost rent from luxury retailer DFS Australia after plans for a shopping precinct at the new casino property in Brisbane were abandoned.

The action follows a $24m lawsuit launched by DFS against Queen’s Wharf owner Destination Brisbane Consortium in the Brisbane Supreme Court earlier this year that claims it was forced to abandon the project due to mould and lead paint contamination. Star has a 50 per cent stake in DBC with its Hong Kong partners.

DFS had earlier boasted it had long-standing and successful relationships with 16 different luxury brands including Louis Vuitton, Cartier, Gucci, Tiffany & Co and Bulgari. It had promised an exciting line-up for Queen’s Wharf in an expansive retail precinct spread over Level 3 and 4 of Queen’s Wharf, as well as the adjacent Old Printery Building. DBC claimed it would not have entered into the agreement if DFS could not secure at least one Louis Vuitton, Dior, Cartier or Gucci outlet to complement other luxury brand retailers.

Queen's Wharf in Brisbane.

It was the condition of the Old Printery Building, originally built in 1887 as a purpose-built government printing office, that proved the major roadblock to the project, with DFS arguing mould and lead paint meant it could not proceed in the given time frames.

However, DBC claims the mould and lead paint in the building was a risk borne by DFS, or its contractor, and any contamination that had not been previously dealt could only be considered a minor defect. DBC claims the representation made by DFS about the luxury brands was misleading or deceptive under the Australian Consumer Law. Because DFS pulled out of the agreement, Queen’s Wharf had lost the opportunity to lease the premises to other luxury tenants or to food or beverage retailers. It is now claiming the costs of preparing the space for other retailers, including the equivalent of 10 years in lost rent. DFS Australia, which is majority-owned by the world’s largest luxury conglomerate Moet Hennessy Louis Vuitton, including Louis Vuitton and Dior, alleges DBC misled it into spending $15m on lavish retail fit-out works in the heritage building last year, when in fact the building was not ready to be handed over when it received the keys in late 2022 because it was contaminated by the flaking lead paint and mould. DFS, which was set to open a three-level T Galleria Emporium in the historic Printery Building on George St, also alleges that after it pulled out of the lease deal, Destination Brisbane wrongly kept its $US6m ($9m) bank guarantee, lodged as part of its plan to be a retail tenant at the Queen’s Wharf site, but Destination Brisbane says it was entitled to call on the guarantee money.

The Star Grand Hotel at Queen’s Wharf precinct.

The legal action comes as Star faces continuing regulatory challenges and a $300m cash crunch. The NSW Independent Casino Commission on Friday issued a show cause notice against Star following the findings of the Bell II inquiry against that could result in a $100m fine and the loss of its Sydney casino licence.

The NICC said four significant breaches had been detailed in the report by Adam Bell SC, including one which resulted in a cash fraud against Star, a failure to run source of wealth checks on hundreds of members flagged as high risk, and fraudulent guest welfare entries which put already vulnerable customers at higher risk of harm.

To raise much needed funds, Star can either raise equity again, strike a convertible bond deal with an investor like Oaktree or Apollo, sell more assets, find a buyer – or become insolvent, with its lenders calling in its loans.

According to a report by The Australian last week, some overseas suitors have had a look at the Star, but they are not credible buyers. Star – which owns casinos in Sydney, Brisbane and on the Gold Coast, and has been criticised by regulators for allowing money laundering to take place at its venues – has a $300m term loan and a $150m revolving credit facility, $30m of which has been drawn. Lenders include Macquarie, Deutsche Bank, Perpetual, Regal, Barclays, Soul Patts and ARCM.

Originally published as Star seeks compensation over Queen’s Wharf luxury precinct