Star Entertainment’s secret plan to sell The Darling hotel in Sydney as pressure mounts

The embattled casino company has been approaching groups to test their interest in buying its hotels – one of which could sell for up to $200m.

Star chief executive Steve McCann told investors the company had fielded approaches for The Darling in Sydney, which would be a prize for trophy buyers.

The race to secure some of Star Entertainment’s best hospitality and property assets has quietly kicked off with the company entertaining bids on its five-star The Darling hotel in Sydney.

While the focus on Friday was on the company’s return to trade on the stock exchange as it plummeted by 44 per cent to just 25c, in a sign of its ongoing distress, some investors are keen to move on its key assets.

The Star’s The Darling hotel is likely to be first cab off the rank as the group hopes selling properties will help stabilise its balance sheet while it hunts for ways to rescue its gambling business.

Incoming chief executive Steve McCann told investors the company had fielded approaches for The Darling in Sydney, which would be a prize for trophy buyers. Some industry players said Star Entertainment had directly sought to interest Asian buyers and cashed-up locals in the property but others close to the company say the interest has been driven by prospective buyers.

Leading agents said buyers would be lining up to purchase the award-winning hotel at a price of $170m to $200m.

“Interest will come from Australian high-net-worth individuals, particularly if they can get vacant possession given it has had $30m to $40m spent on a refurbishment,” one agent said.

The agent said Singaporeans also would be interested in the 171-room hotel, the centrepiece of The Star’s hotels, with rooms renting for about $380 a night.

The Darling Hotel Sydney.

Said one hotel investor: “This hotel will bring significant interest. According to the Dransfield Report Sydney is one of the strongest markets in Australia and there is not a lot of stock turning over. It’s a good opportunity.”

Star already has sold the leasehold interest in the Treasury Brisbane to Griffith University for $67.5m and will receive net proceeds of $60.7m after settlement adjustments. It is now trying to sell two associated properties.

It has had an offshore party in due diligence on the Treasury Hotel but it is running a fresh process that could bring in about $40m. It also has a local party in due diligence on the carpark, which is worth about $50m.

Offloading that could be a pointer to further sales as the casino group in 2020 tried to sell the carpark at the Sydney property before it fell afoul of regulators and was hit by hefty writedowns.

Mr McCann told investors the company had “quite a number of non-core assets”.

Almost two decades ago, with the sign-off of Hard Rock’s co-founder, Peter Morton, Brisbane developer Patrick Farrugia’s HDI Group and Grocon engaged with Star, which then formed part of Tabcorp, to acquire or enter into a joint venture for a hotel in Ultimo.

Star ultimately decided to develop its own brand of hotel to take to the world, The Darling.

Now it is on the block. “What we obviously need to do is make sure if we’re selling assets, they’re not having a material negative impact on revenue,” Mr McCann said. “And we believe that there are opportunities that relate to those hotels where we can secure enough room nights for our customers as part of a transaction and still get a good outcome.”

Originally published as Star Entertainment’s secret plan to sell The Darling hotel in Sydney as pressure mounts