Inside Asian Gaming

38 press confidence that Packer will prove suc- cessful in establishing a worldwide casino network. One told IGWB magazine that the younger Packer was genuinely inspirational and had a vision for Crown as a major player in international gaming. International reach Meanwhile, James Packer has not been idle with this money. In April, PBL/Crown an- nounced it had agreed to purchase a 19.6% interest in Fontainebleau Resorts for US$250 million.The company is developing Fontaine- bleau-Las Vegas, a US$2.8 billion, 63-story re- sort located on 24.5 acres on the Las Vegas Strip. It is also spending US$500 million on a makeover of its famed Fontainebleau Hotel in Miami Beach. Packer and PBL also announced the for- mation of Crown Las Vegas, a joint venture with IDM Properties of Texas and the New York Capital Management. The group has in- vested US$22.5 million on an option for Las Vegas Strip land adjacent to Fontainebleau- Las Vegas. Preliminary plans call for the de- velopment of Crown Las Vegas, which would include a 5,000-room hotel, 250,000 square feet of casino space and 625,000 square feet of retail, dining, entertainment and conven- tion space. Packer and Crown Limited will have to obtain a Nevada gaming license be- fore the project can commence. Money from PBL sales has also gone into a joint venture between Crown Limited and Macquarie Bank, which spent A$855 million to purchase Canadian Gateway, the owner and operator of nine casinos in Alberta and British Columbia. Crown/PBL has also pur- chased a 50% interest in Aspinalls,a UK-based gaming company that owns casino facilities in London, Newcastle and Swansea as well as a proposed development in Cardiff. Publishing & Broadcasting is also re- ported to be involved in casino projects in Hungary, Russia and other nations. Risk management On paper, such a heavy investiture in competitive international gaming markets appears risky, but Packer has done a judi- cious job in minimizing PBL’s exposure. One way he has accomplished this is through the use of joint venture partnerships. For example, the Macau arrangement Packer struck with Melco let Crown/PBL tap into the local expertise provided by the Ho family. It also provided a platform to share the risks associated with raising develop- ment capital—it was Melco PBL Entertain- ment that listed on NASDAQ last December and raised US$1.15 billion toward its Asian casino projects; neither partner had to bear the full weight of procuring equity. Subsequent Crown/PBL entrees into new gaming markets have been accomplished through risk-sharing joint ventures, such as with Macquarie in Canada, Aspinalls in the United Kingdom and a host of other compa- nies in the United States. In addition, Packer has also been careful in limiting his exposure to any single market. His strategy of seeking out investments in ju- risdictions across the world provides financial stability, especially given the uncertainty of markets like Macau. Indeed, the Chinese gov- ernment in May announced new restrictions on the issue of individual travel permits that limit the ability of mainland Chinese to travel frequently to Macau’s casinos. The fact PBL has development eggs in numerous other regional baskets helps to alleviate investor angst. Packer recognizes the importance of achieving a geographic spread in his gaming interests with solid positions in stable markets such as the United States,Australia and Britain as well as investments in developing markets. By pushing PBL all-in on a casino devel- opment/management future, James Packer has shown he is willing to wager big. In Melbourne’s Crown Casino, his company al- ready has one of the world’s most success- ful resort properties. But it is likely how well Packer manages PBL’s entry into various international markets that will ultimately determine if the big gamble develops into a historic payoff. By Tom Skotnicki. Reprinted with permis- sion from International Gaming and Wager- ing Business (IGWB) magazine. Publishing & Broadcasting’s gaming division, which includes Crown Casino and Perth’s Burswood Casino (added in 2005 and pictured here), gener- ates yearly EBITDA of A$523 million (US$445 million), up from A$300 mil- lion the group generated in 2003. From modest beginnings, the gaming divi- sion became the highest grossing busi- ness within PBL’s vast empire, and the relatively predictable earnings of these Australian casino assets will provide the long-term cashflow to fund James Packer’s global gaming aspirations.