Iris Capital’s Sam Arnaout bets on the house with second casino
With his $63m purchase of Canberra Casino, pub baron Sam Arnaout now owns two of the nation’s 13 casinos.
With just 13 around the country, Iris Capital’s Sam Arnaout’s latest play for Casino Canberra comes as the latest shake-up of the meeting of gaming and property takes shape.
Mr Arnaout’s $63m purchase of Canberra Casino, which saw him challenged by fellow pub barons the Oscar Group, comes as his second buy of one of Australia’s few casinos.
Just last year Mr Arnaout dropped $105m to buy Alice Springs Casino.
While being led by Crown’s Melbourne and Sydney sites, as well as Sydney’s Star Casino, Australia boasts a variety of other flagship gaming venues spread across the country.
Queensland tops the national casino tally, with the Reef Hotel Casino in Cairns, Townsville’s The Ville Casino-Resort, Star’s Queen’s Wharf Brisbane, and the Star Gold Coast all on the list.
NSW has two casinos, including Crown Barangaroo and Star’s Pyrmont gaming venue. Crown’s property operation is already a famed money spinner with more than $1bn of luxury unit sales. And Star is pursuing plans for a six-star hotel on its existing site and another lucrative mixed-use tower.
Victoria boasts the riverfront Crown site, where Blackstone could expand after Crown in 2019 shelled out $80m to buy developer Schiavello Group’s half stake in the abandoned One Queensbridge project. It also has an outpost in Perth where there are development opportunities. To many, Blackstone’s $8.9bn bid for Crown was as much a property play as it was a massive buyout of the gaming empire. There has been much speculation that Blackstone could look to hive off and lease back the casino property assets, as it has done overseas in the past.
South Australia, meanwhile, has Adelaide SkyCity, with the Northern Territory boasting two sites, one the Darwin Delaware North Mindil Beach Casino Resort, and Iris Capital’s Alice Springs property.
Tasmania has two gaming sites, controlled by the Federal Group, with one on the banks of the Derwent in Hobart and the other a sprawling country club-style site west of Launceston.
The only missing one of the bunch is the mothballed Christmas Island Casino, which shut its doors in 1998.
Most of Australia’s casinos were built in the 1970s and 80s at a time when they offered the only real access to gaming for the average punter. The Perth casino retains this role, with poker machines barred from the state’s pubs.
The liberalisation of poker machines, spreading to many pubs across Australia, has blunted the gaming destination factor that once drove the sites leaving most casinos to look to attract punters keen to access more than pub grub and a few drinks.
By snapping up one of Australia’s few casinos, Mr Arnaout has put his name on a slim number of flagship accommodation-resort-gaming venues in the market, with just 13 casinos in Australia.
But the recent ticket prices of Alice Springs and Canberra casinos comes in the face of the ballooning values of pubs.
In Sydney, most of all the near-guaranteed rivers of money from the gaming machines that accompany pub and hotel licences has seen a rush to build an empire of venues.
Prior to making his play for Canberra Casino, Mr Arnaout forked out $80m to buy the Strathfield Hotel in Sydney’s inner-west.
The purchase price, at $17m more than the Canberra Casino and only $25m shy of the Alice Springs Casino, points to the major value drivers in the casino space.
However, Canberra casino, unlike all of Australia’s others, is without poker machines, has low bet limits on its gaming tables, and does not have its own accommodation, instead referring punters to the nearby Crowne Plaza site.
The Tony Fung-controlled Aquis Entertainment, which has just sold the site to Iris Capital, bought Canberra Casino in 2014 with plans to refurbish the site and seeking to install up to 500 slot machines.
However, Aquis’ bid was kiboshed by the ACT government – backed by the territory’s club lobby – proposing instead that Canberra Casino install 200 slot machines and 60 electronic gaming machines.
Aquis didn’t proceed with the plan, noting the numbers for the neutered proposal didn’t stack up.
HTL Property managing director Andrew Jolliffe said the Strathfield Hotel’s gaming machine earnings were a clear driver of value for the site. This was compared to Canberra’s comparatively lower price.
He said the purchase of Lasseters in Alice Springs was a similar proposition, with the casino to act as the flagship venue for a bevy of sites Mr Arnaout has bought in the Red Centre.
In addition to the casino, Mr Arnaout has put down $60m buying up four hotels in Alice Springs, as well as announcing plans to bulk out and refurbish Lasseters which is now showing its vintage.
“It’s about making (Alice Springs) a destination,” Mr Jolliffe said.
“It’s a magic part of Australia and it’s underinvested. (Sam) realises it’s incumbent upon him to accelerate that growth … he sees this investment as being more than just a passenger style approach but to actually accelerate that change.”
Mr Arnaout’s plans for Alice Springs point in the direction taken by many casino owners in recent years. Townsville’s The Ville Resort-Casino was bought by former Computershare supremo Chris Morris in 2014 for $70m from Echo Entertainment Group.
Since buying the casino, once touted as Australia’s worst-performing, Mr Morris has turned the waterfront site around.
Echo Entertainment had invested in its gaming floors, but Mr Morris said he saw its potential as a resort and a flagship site for his hospitality empire he was building across Queensland.
Slapping down $50m on a facelift of the casino when he first bought it, Mr Morris is now spending almost $90m to build a 140-room hotel next door.
“I get offers all the time,” Mr Morris said. “I wouldn’t even think about selling it for under $300m, but with the new hotel, it’ll be more than that.
“There are some crazy prices for pubs (but) you can have a pub, I’ll have a casino any day.”
Mr Morris said the focus of Townsville on domestic punters was paying dividends, noting how other Australian casinos had put all their hopes on international high rollers.
Mr Morris said he’d looked at buying Darwin’s casino, which was eventually bought by American hospitality giant Delaware North.
Delaware North owns a string of gaming sites in the United States and it bought the Mindil Beach Casino Resort in 2019 from listed casino group SkyCity Entertainment for $188m. However, this was down on SkyCity’s entry of almost $195m when it bought the site in 2004.
Mindil Beach Casino Resort general manager Avril Baynes said the site had seen a suite of rolling upgrades and updates since its sale.
This includes work to the exterior of the building, putting in new lifts, repainting interiors, installing backup power supplies, replacing airconditioning.
Ms Baynes said the resort was currently looking to refurbish its 120 hotel rooms, as well as building two luxury villas onsite.
“We’ve been very strongly focused on continually upgrading the property,” Ms Bayes said. “As you can imagine it’s a 40-year-old building that needs some fairly significant capital expenditure.”
Adelaide’s SkyCity casino just wrapped up a $330m redevelopment, opening a new five-star luxury hotel, new restaurants and bars, a conference and events facility, as well as expanding gaming space across the sprawling site.
The upgrade leaves the site with 120 table games, 1080 electronic gaming machines and 120 automated electronic table games.
SkyCity Australia chief operating officer David Christian said the redesign of the site was aimed at bringing forward other offerings for the tourist market.
“Whilst it was a difficult time opening the expanded property amid Covid restrictions, we are slowly getting back to pre-pandemic operational hours and we’re enjoying seeing increased CBD visitation,” he said.
Tasmanian gaming giant the Federal Group who own and operate the Launceston and Hobart casinos is currently redeveloping both sites.
The business will also benefit from an expected value uplift after the Tasmanian government shakes up its poker machine licensing system, which will see the venue owner vested with the rights to the machine.
The Wrest Point Casino in Hobart is undergoing a $42.9m renovation, including plans to build a waterfront gaming venue and expand its showroom and hospitality offerings.
Federal Group executive general manager Daniel Hanna said the company was also looking to capitalise on the Launceston location, building housing as part of a 372-lot subdivision of the sprawling site.
Mr Jolliffe said the past few years had seen a period of “intransigence” in the casino market, but the recent drumbeat of sales showed the “great appetite for change”.
“Those hoteliers now have the assets to participate in those transactions,” he said.
“Domestic casinos very clearly have to prosecute the total experience patron base, not mono or zero channel entertainment levers. I think they’re doing that but to the extent that they’re not, then these guys have the experience and financial capacity to deliver on those things.”