Blackstone plans Crown casino spend
Investment giant Blackstone is ploughing more cash into Australia’s lucrative casino scene, while pursuing plans to get into the student housing sector too.
US private equity and property giant Blackstone is prepared to spend hundreds of millions of dollars in upgrading the operations of Crown Resorts, including a refurbishment of the casino group’s original property in Melbourne, according to its global co-head of real estate, Kathleen McCarthy.
The group declined to comment on any potential bid for NSW-based casino company Star Entertainment, operator of the rival to Crown’s casino in Sydney.
Speaking in Sydney on her second visit to Australia this year, Ms McCarthy said she could not talk about whether Blackstone was interested in buying the ASX-listed Star following its $8.9bn purchase of Crown last year.
But she said Blackstone, which has more than $US1 trillion ($1.57 trillion) in assets under management globally, would continue to look for high-quality real estate assets in Australia, where it could use its global expertise to improve their operations.
Blackstone has argued that its expertise in the casino business in Las Vegas has given it the expertise in upgrading and running companies in the casino sector.
Ms McCarthy said its focus in Australia, where it already has a significant footprint, included logistic centres, as well as build-to-rent and student accommodation.
“We can’t comment on that at this time,” she said when asked if Blackstone would consider a bid for Star, which owns casino and hotel assets in Sydney, Brisbane and the Gold Coast.
Star’s shares have been under heavy pressure as a result of regulatory action and high turnover at the board and executive level, down from almost $3.80 in 2021, to just above 60c this week.
Blackstone’s global assets under management include companies in private equity, real estate, private and liquid credit, infrastructure and life sciences.
It has a real estate portfolio of more than $US600bn, which includes 230 companies with 13,000 properties.
“We’re really focused on the work ahead of us at Crown and the opportunity to transform the business,” Ms McCarthy said.
“But what has made Blackstone so successful is focusing on high-quality real estate where we have an opportunity to make operational interventions to transform the guest experience and the cashflow profile of the assets.
“Broadly, in the market, particularly in a dislocated environment, we see a lot of opportunities ahead to be investing in the themes we like.”
Blackstone’s investment in Crown is its biggest single asset in the Asia-Pacific.
Ms McCarthy said Blackstone had already spent “hundreds of millions of dollars” in upgrading the Crown casinos in Australia, mainly on behind-the-scenes work introducing responsible gaming operations and upgrading their compliance and financial systems “to world-class standards”.
But she said there was a lot more to be done, including upgrading Crown’s Melbourne casino to make it more broadly appealing and more connected with the Yarra River.
“We have invested hundreds of millions of dollars (behind the scenes, but) now we get to the really exciting part, which is transforming the customer experience and what they are seeing,” Ms McCarthy said.
“We remain very excited, and we are just really beginning the journey here.”
“Melbourne is an incredible piece of real estate, an incredible property, and a great location.
“But it also needs capital investment to make it an exciting and fresh place for folks to come.
“We want to be attracting guests from all over the world and also from within Australia, whether it is the eating experience or the shows or the shopping experience.
“We see an opportunity to physically open up the property to make it feel a little different.”
She said Blackstone had learned from its experience in Las Vegas when it bought the loss-making Cosmopolitan casino and hotel company from its bankers in 2014 for $US1.73bn.
It sold the property last year for $US5.65bn after investing more than $US500m in upgrading its operations.
The group owns several properties in Las Vegas operated by MGM Resorts, including the Bellagio, Aria and Vdara.
“The clearest analogy in terms of executing on this strategy (when it comes to casinos) was the investment we made in LasVegas in the Cosmopolitan Hotel,” she said.
“There were lots of different opportunities to think about the capital we invested in and how we operated the asset.”
She said Blackstone had been prepared to invest significantly in its upgrade, despite the fact that it was relatively new when it bought it.
“We really touched every inch of that property in transforming how it operated and what the customer experienced,” she said.
“We are really bringing in that playbook with Crown.
“We came into this investment with our eyes wide open in terms of the work that needed to be done.”
Ms McCarthy said Blackstone also planned to expand its involvement in the student housing sector in Australia following its purchase of Brisbane-based Student One last month.
Blackstone bought the business, which includes three sites with about 2300 beds, for $500m.
Ms McCarthy said Blackstone saw opportunities in the student housing market similar to that in the UK, which is also a large exporter of education.
“Before the pandemic we made an investment in the UK in a company called iQ, the second-largest student housing company in the country,” she said.
“The UK is very similar to Australia in that it thinks of education as an export.
“In both the UK and Australia, the universities are growing and there are more student visas available but there are also enormous housing constraints in the market broadly, and for student housing specifically.”
Ms McCarthy said Blackstone saw Student One as a platform to expand the sector in Australia.
Blackstone has also spent $US13bn buying US student housing group American Campus Communities last year.
“One of the benefits of operating globally is seeing what is happening in one market and being able to transform that information globally,” she said.
“We have had border closures due to Covid which have affected international student numbers, but the market is recovering.
Ms McCarthy said Blackstone was also interested in the logistics sector in Australia because of its confidence in the future of e-commerce, which is heavily dependent on distribution centres.
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