Packer saves his Barangaroo baby - and its two billion-dollar view

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This was published 5 years ago

Packer saves his Barangaroo baby - and its two billion-dollar view

By Elizabeth Knight

Crown Resorts scored a major win in its battle to retain the much-vaunted views from James Packer’s Sydney dream Barangaroo casino development.

But for Crown and fellow litigant Lendlease the victory is not comprehensive yet. The judge himself suggested there would likely be an appeal from the loser, the Barangaroo Delivery Authority (BDA).

It’s been an expensive legal action to run but Packer has a very well-heralded emotional attachment to his Sydney casino project. He clearly thinks a Sydney foreshore tower needs views to be iconic. Barangaroo has been his baby and will probably be his major legacy.

James Packer has had a court win over his Barangaroo development.

James Packer has had a court win over his Barangaroo development.

Packer personally took charge of the initial proposal and lobbied the NSW government, winning the support of then premier, Barry O’Farrell, as well as his political opponents. Approval was granted in 2012.

There have been many changes to the plans since then - and most of these have favoured Crown.

Friday’s judgment from the NSW Supreme Court found the BDA breached development agreements with Crown and Lendlease because it didn’t discuss development bids for other parts of the Barangaroo precinct with them.

And as the Supreme Court Justice Robert McDougall summed it up, "Those views are of great value to Crown and Lendlease respectively."

Just ask any Sydney real estate agent what a harbour view or even a harbour glimpse is worth. The answer is jaw-dropping.

But the court judgment didn’t delve into this level of detail. Neither has Crown nor Lendlease.

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The Lendlease Barangaroo development is residential - thus the loss of vista from any affected apartments would be easier to calculate.

The value of a view.

The value of a view.

For Crown the calculations are a bit harder. Its apartments, which sit at the top of its development, would not have been impacted by an adjacent project being developed by a Grocon-led consortium.

But some of the rooms in Packer’s hotel would have their views of the Harbour Bridge and Opera House impaired to some extent.

The Crown argument is that the rates would be lowered in some rooms and, over the course of a 99-year lease, the net present value of future cash flows would be large enough.

Indeed a $2 billion figure has been bandied around - but never officially confirmed.

The share price certainly didn’t reflect any real bonus for Crown. To be fair, while it is positive news it is way too long term to affect earnings. The development won’t be finished for a couple of years.

Investors in Crown are far more interested about the recovery in the numbers of VIP gamblers coming from Asia.

Barangaroo has been his baby and will probably be his major legacy.

Meanwhile, thanks to this decisive win by Lendlease and Crown it would seem the BDA will need to go back to the drawing board and ensure that any plans for the Central part of the Barangaroo precinct will need to start from the base line that buildings won’t impair the view of their southern precinct neighbours.

The BDA needs to "consult with Crown about any application for the proposed development of Central Barangaroo that differs from that provided for in the relevant concept plan for Central Barangaroo in existence at the time the Crown Development Agreement was entered into", Crown said on Friday.

Crown also noted that the BDA also needs to negotiate in good faith on any changes with the aim of retaining sight lines.

The summary judgment notes, "The negotiations were required to commence from the position that Crown and Lendlease’s sight lines were to be retained. Whether they actually are retained is a matter that will be determined in those good faith discussions and negotiations."

It is difficult to see how Crown or Lendlease would give a (vertical) inch in that negotiation.

For its part, the BDA was pretty amazed at the legal outcome. One suspects Crown and Lendlease were equally surprised.

Only two weeks ago the court was hearing from experts with competing assessments on the extent to which Lendlease and Crown developments’ views would be impacted.

Documents tendered to the court early in November showed that concessions already made by the state-run BDA meant only small sections of Crown's tower would be affected by developments proposed for neighbouring Central Barangaroo.

The company's own expert report, in court evidence, showed the most recent plans for Central Barangaroo, prepared by the BDA in September, would block views of the base of the Harbour Bridge only from level three to level seven of Crown's 71-storey development, or roughly 15 metres of the 275-metre tower.

For Crown and Lendlease the court outcome seems to have allowed them to have inched closer to certainty.

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