James Packer’s Crown, Lendlease win Barangaroo view legal blue
James Packer’s Crown and Lendlease have won an epic court battle against the Barangaroo authority over harbour views.
Billionaire James Packer’s plans for an casino, hotel and apartment tower at Sydney’s harbourside Barangaroo have received a major boost with his Crown Resorts yesterday winning a long-running court battle against the authority overseeing the area.
Crown Resorts and developer Lendlease now have the upper hand as they seek to preserve views from their projects — in Packer’s case a $2.2 billion entertainment complex and in Lendlease’s a $1bn-plus apartment project — against any encroachment from towers at a nearby precinct that Grocon will develop.
But the decision leaves the future of one of the largest developments in NSW in limbo, with Grocon and its partners facing being forced to go back to the drawing board to rework both their property schemes and financial structures if the authority must satisfy new demands from Crown and Lendlease.
Crown and Lendlease had gone to court seeking to ensure their sightlines from the Sydney Harbour Bridge to Sydney Opera House were maintained and argued that the authority had not acted in good faith in negotiations.
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SupCt declares that the Barangaroo Delivery Authority breached the development agreements between it, Crown, and Lendlease by failing to negotiate with them in good faith before considering and approving a bid by Grocon. Sum: https://t.co/yo02ivLMap
— NSW Supreme Court (@NSWSupCt) December 13, 2018
They had feared that allowing the development of high towers at the adjacent Central Barangaroo, the $5bn area being led by Grocon and backed by Chinese group Aqualand and local Westfield owner the Scentre Group, could significantly block views from their projects.
The legal case had been preceded by almost three years of tenders and back room negotiations after the size of the Central precinct was significantly enlarged to help pay for a new metro station and Grocon surprised the market by beating Lendlease to head development of that area.
The shock ruling in the New South Wales Supreme Court, by Justice Robert McDougall, held that the NSW government’s Barangaroo Development Authority had breached its development agreements with Crown and Lendlease.
The court said the authority had considered various bids to develop Central Barangaroo without first discussing and negotiating with them about how the crucial sight lines could be retained.
Grocon won a preferred position on the Central precinct in 2016 and Crown and Lendlease in August this year launched legal proceedings seeking orders that the authority be restrained from proceeding with Grocon until it engaged in good faith negotiations and also put up a proposal allowing for the sight lines to be kept.
The legal action came after extensive back room negotiations that were overseen by players including Mr Packer and Lendlease’s then David Crawford-led board that came close to resolving the dispute before battle lines hardened.
Despite lobbying, NSW Premier Gladys Berejiklian declined to intervene in the dispute, and documents tendered in the case show the government supporting the authority’s attempts to maximise the value of Central Barangaroo.
However, this approach was rejected and the court held that the purpose of the sight line clauses that Crown and Lendlease earlier struck with the NSW government was to give them a seat at the table, enabling negotiations as to how the development of Central Barangaroo should proceed, right after Grocon has been selected.
Property players noted this could have been difficult as Lendlease had only just lost the tender and even now would be unlikely be amenable to tower that intruded on views from its One Sydney Harbour apartment project.
The judgement said that postponing the negotiations until the very end — when a formal application for planning approval was to be lodged — would “largely eliminate” the benefits of good faith negotiations because by that point the authority would have closed its mind to alternative proposals.
Although the retention of sight lines was not guaranteed, the court agreed with Crown and Lendlease that negotiations must start from the position of retaining them, and the authority had breached this obligation.
An authority spokesman said it had acted to ensure Central Barangaroo would deliver on the vision of a “vibrant, mixed-use precinct” and to maximise public value.
“The Authority has at all times sought to protect the public interest,” he said. “We are disappointed with the result of the proceedings in the Supreme Court.”
While the authority examines the ramifications of the judgement, the ruling will likely tilt the balance in favour of Crown and Lendlease in any future talks.
This could see Grocon’s planned precinct reworked, as it now must accommodate the demands of apartment developer Aqualand and office investor, Oxford Properties Group, that has agreed to buy a $1.4bn commercial complex, while dealing with Crown and Lendlease’s likely calls for lower buildings on its site.
A spokesman for developer Lendlease said it had been “very reluctant” to take legal action but after nearly three years of stalled negotiations “felt strongly” that it had no option.
A Crown statement noted the judgement and said orders in the proceedings would be made by the court on Monday.
In a further complication, the authority could launch an appeal, with this possibility flagged in the judgement.
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