James Packer’s sweet deals for casino
What James Packer wants, James Packer tends to get. So when he called last week for the liberalisation of Australia’s visa rules, to “throw open the doors” to Chinese tourists, it was a clear sign of what’s next for the gaming mogul.
In an interview with the Herald Sun newspaper – an exclusive, rather symbolically given in Macau – Australia’s third-richest person described the current visa requirements for Chinese nationals as “stupid” and “hypocritical”.
The tone he struck was one of reasonable incredulity: “Why should the visa requirements for a wealthy Chinese visitor wanting to come to Australia be any harder than the visa requirements for a wealthy American?”
More interesting than Packers’s motivation – a transparent desire to see more of those Chinese high rollers patronising his Australian casinos – was his timing.
The story came out Friday, April 4. On the Saturday, Prime Minister Tony Abbott departed with what the government claims to be Australia’s largest trade delegation to Asia – Packer among its number.
Abbott was in pursuit of new trade deals with the three powerhouse Asian economies: Japan, South Korea and, biggest of all, China. Given the tensions between the three countries, the prime minister was embarking on a mission of delicate schmoozing. He had been given stern advice by all the foreign policy experts: he must not refer to the Japanese as our “allies”, he must not repeat past gaffes by nominating who is our “best friend in Asia”, he must not say anything to indicate discrimination against Australia’s largest trading partner, China.
Packer chose his moment: he pointed a very big finger at a big way in which we discriminate. The citizens of 70-odd countries – including Japan and Korea – can apply online for a visa at a cost of just $20, he said. But the Chinese are denied that option, and stung $130.
The man knows how to apply pressure. And clearly, he spoke in the expectation of change.
The Saturday Paper’s inquiries with the immigration department, and the office of the minister, Scott Morrison, to determine how confident Packer should be of a change received no more than a link to a 3000-word speech the minister gave to the Tourism and Transport Forum in March.
Buried in the middle of it was this sentence: “Further expansion of online lodgement is being managed as part of a phased global rollout.”
If you were a betting person – and James Packer loves a betting person – you might care to punt on an imminent change to Australia’s visa regime and the arrival in Australia of many more than the 473,000 Chinese visitors who came here in 2012-13. Which, no doubt, means more money for Packer’s Crown casinos.
It would fit the pattern to date of annexing what was once public land at Barangaroo on the Sydney Harbour foreshore to build a massive, six-star hotel and casino complex. State and federal laws and regulations have flexed or melted away in the project’s path. Ordinary rules don’t seem to apply to James Packer.
Initially, following a long campaign of white-anting Sydney’s existing casino, The Star, and its operator, Echo Entertainment, a bipartisan decision was made to change New South Wales’s one-casino law, paving the way for Packer’s Crown Resorts to pitch a development. Former prime minister Paul Keating, who Packer duchessed with requests for architectural advice, played a role in pushing the Packer vision for Barangaroo.
Since the project’s green light, workplace health and safety provisions have been waived in a deal with the union United Voice to permit smoking in Crown’s gaming rooms. Support was gained from the charity Mission Australia in return for the provision of counselling services for problem gamblers, and from the National Centre for Indigenous Excellence in return for the promise of jobs. The Murdoch media and Fairfax’s Financial Review were co-opted to the cause, as the plan went through multiple iterations and got progressively bigger.
Packer’s visa play is important here. The mogul now expects the federal Liberal government to help him keep his promise to the NSW Liberal government. From the time he first put in his unsolicited proposal for the Crown development, he promised it would not be about fleecing small-time gamblers.
The detailed proposal submitted to the premier’s department on June 21, 2013 promised: “Crown Sydney will not offer poker machines or low limit tables, and the VIP gaming facilities will not be accessible by the NSW general public …”
It estimated that only 5 per cent of local gaming patrons would play in “such a restricted gaming facility”.
That’s not a lot of people, particularly when you consider that there are already more than a dozen casinos in Australia. Further, Australia is experiencing something of a casino boom. There are, for example, 12 proposals for three new licences in Queensland alone, and they overwhelmingly target the top end of the market. There just aren’t enough high rollers in Australia to support all this.
Thus the grand plan to bring gamblers from overseas.
As Packer wrote in that 2013 submission: “I believe that Crown Sydney will be able to almost treble the volume of VIP business coming to Sydney from Asia, and in particular, China. Crown has the advantage of being able to leverage its joint venture in Macau – Melco Crown Entertainment (MCE). MCE has a significant share of the Macau VIP gaming market, which is the largest VIP gaming market in the world.”
The submission included a series of impressive-looking projections of the financial benefits of the project: employment growth of 2300 to 3300; added export income of $513 million; new business investment of $151 million; gross state product up by $638 million; and, extra gaming tax revenue of up to $1.4 billion over a decade.
But those were just estimates. What was actually promised was rather less: a guarantee of $1 billion in extra gaming revenue by 2036 and “that the average annual gaming tax received by the NSW Government from Crown Sydney and The Star in the first three years after Crown Sydney opens will exceed the gaming tax revenue received by the NSW Government from The Star in the year prior to Crown Sydney opening.”
To put it more simply: they promised the gambling tax revenue from two casinos would be greater than the revenue from one.
If that sounds a bit dodgy to you, you’re not alone. But then the whole process surrounding the Sydney Crown casino project has been extraordinary from the beginning.
The year 2003 saw the end of stevedoring at East Darling Harbour – now Barangaroo – leaving a unique opportunity to do something really imaginative with a 22-hectare site on the western side of the Sydney city centre.
There was a design competition, won by a consortium including Sydney architects Hill Thalis, in 2006. The plan was to keep about half the site, including the whole 1.4-kilometre foreshore, as inalienable public land.
There would be a new boulevard built, separating the waterside park from some 330,000 square metres of new commercial, retail and residential development on the eastern side nearer the city. The idea, says Philip Thalis, was to “keep the developers behind that line”. It was also to have a series of developers construct different precincts within the overall plan, to avoid the whole thing looking too homogenous.
But that vision didn’t last. Almost immediately, says Thalis, bits of the plan started getting changed. The development authority became unresponsive. Within a matter of months “they stopped returning our phone calls”.
Development tenders were called and Lend Lease won. In 2009, the whole Thalis plan was junked in favour of one being pushed by Lend Lease. Out went the park at the southern end of the site and in went another 120,000 square metres of commercial space. Subsequently, another 60,000 was added.
There are indications that Packer had been considering a casino for the site since 2010, but the actual proposal was not unveiled until February 2012.
That attracted a lot of interest, of course. Rather more interest than an announcement the previous month that the government was adopting a new policy for the handling of certain large private infrastructure projects – so-called “unsolicited proposals” – which would allow them to bypass the usual tender and independent assessment processes.
Still, the government was keen to present the appearance of some independent scrutiny of the casino plan. On November 3, 2012 – a Saturday, when media scrutiny is low – Premier Barry O’Farrell put out a release announcing the appointment of an “assessment team” to consider the net benefit of Barangaroo to NSW taxpayers, and to determine any conditions to apply to the development. It would be led by the “respected former head of the Australian Future Fund” David Murray.
“The appointment of Mr Murray as independent chair will give the community confidence in the process and probity of the consideration of the Crown proposal,” the release stated.
The arch-conservative, climate change-denying ex-banker is something of a Liberal Party favourite for ticklish jobs. The Abbott federal government, having promised “no surprises” when it came to power, promptly appointed Murray to head an inquiry into the financial system, presumably because they deemed him a no-surprises guy.
The appearance of independence in the Phase Two Barangaroo review was undermined somewhat when documents were unearthed showing the premier’s department had prepared a series of “key messages” for the chairman of the committee, suggesting “positive” answers that should be given to “negatively framed” questions about Crown’s proposal.
When Murray reported on the Crown development in July last year, there were no surprises, at least for O’Farrell. He approved it. Others, though, were more than a little surprised at the generous 29 per cent tax rate agreed to by Murray’s review. It was not much different from what Packer proposed to the committee, and very much lower than what had previously applied to the existing Star casino.
As one commentator, Jacob Saulwick, noted in The Sydney Morning Herald: “In 2010 the big miners had to go to the trouble of tearing down a prime minister before Julia Gillard and Wayne Swan let them write their own tax. Much neater to simply propose your own tax treatment, unsolicited.”
The Barangaroo plan, says the original architect, Philip Thalis, is “an example of all the worst of Sydney and NSW, and it just keeps getting worse”.
The vibrant public space he envisioned seven years ago has shrunk to become “basically an enclave of privilege and exclusion”.
Nonetheless, the casino is not quite a done deal, according to David Shoebridge, who has been planning spokesman for the NSW Greens throughout the whole process, under both the Labor and Liberal governments.
“As a development of state significance, it’s supposed to go to this quasi-independent statutory body called the Planning Assessment Commission,” he says. “Under the standard method of operations, the PAC would have a public meeting, call for submissions and either approve or reject it.”
The statistical record shows the PAC agrees with the government’s planning department 96.5 per cent of the time – but its decisions are appealable in the Land and Environment Court.
This appeals process, Shoebridge suggests, poses a threat to the government’s plan to have the whole project slide seamlessly through.
“How do they fix this? There’s a bizarre part of the planning law which allows the minister to issue a fresh and separate delegation to the PAC for an individual project,” he says.
The process is “for all intents and purposes” identical to what the PAC would normally do, says Shoebridge, with just one difference. “Under such a separate delegation, all appeal rights to the court are lost, and the decision ends with the minister. No one can challenge it.”
“We are expecting the application to be lodged any time,” says Shoebridge. “If I were Packer, I’d probably lodge it Thursday before Easter.”
We’ll see if he’s right.
Father and son
It’s been quite a ride for James Packer this past decade or so, as he has struggled under the burden of being a scion of one of Australia’s most powerful families. Growing up in public, sometimes with his pants down, learning how to wield influence like his father and grandfather before him.
Kerry Packer, says Richard Walsh, who ran the family publishing business from 1986 to 2000, knew “how to charm and woo, and how to bully … and when to move from one technique to the other”.
And James, Walsh says, has learned that from his dad.
Mind you, it took a while to learn it properly. He’s been after this casino for some time. Famously, in 1994, during a bid for the licence for what is now The Star, 26-year-old Packer phoned a NSW government minister and said: “The old man told me to ring. This is the message: if we don’t win the casino, you guys are fucked.”
They didn’t get the licence – a rare loss for the Packer family.
There were other losses for young James, too, most notably his OneTel venture with his fellow scion Lachlan Murdoch, which fell over spectacularly in 2001.
According to two books on James, by Pamela Williams and Paul Barry, that failure, which coincided with the end of Packer’s first marriage, to Jodhi Meares, caused him to have a breakdown. His weight blew out dramatically.
When Kerry died in 2005, James inherited a fortune of some $5 billion, mostly still tied up in media. But he was to change all that. He sold most of his dad’s precious media to a Hong Kong-based private equity firm in 2006-07, for $4 billion.
The timing of the sale, just before the global financial crisis and ahead of the steep decline of media stocks, was great. But the timing of his reinvestment was awful. He plunged into American casinos, just as the same GFC hit the US property market, not to mention the discretionary spending of gamblers.
He lost roughly half his fortune. In 2007, at the height of his wealth, he was worth $7.25 billion. Two years later, according the BRW Rich List, his wealth had fallen to $3 billion. This year’s Rich List had him restored to $6.24 billion.
As it summarised: “James Packer has grown his casino operations into one of Australia’s largest resort and entertainment groups. Crown Resorts has assets and investments in Melbourne, Perth, Macau and London. Crown’s new and upcoming ventures are in the Barangaroo development in Sydney and in Colombo, Sri Lanka. Crown’s share price is up over 45 per cent since last year. Packer’s Macau joint venture, Melco Crown, reported a 46 per cent rise in earnings before interest, taxation, depreciation and amortisation in February, and stated it would start paying dividends in 2014.”
These days, the Packer empire is all about gambling. While Tony Abbott was focusing on beef exports in Japan, Packer was talking about a proposed $5.4 billion casino there. Plans are afoot, too, for more casinos, in South Korea and Vietnam.
“As a kid I saw that Dad lost a lot of money in casinos, and I didn’t understand that,” Packer told Forbes in a recent profile. “[But] I thought this must be a great business.”
James is not Kerry, particularly when it comes to doing business.
“He doesn’t operate like his old man,” says businessman and company director Geoffrey Cousins. “His old man was a very instinctive businessman ... and even though he didn’t really read very much, he could look at a set of figures and somehow see that something was wrong with them. He had great instincts for things like that. And he had a great feeling for what the public wanted. That’s why he was so good at television.”
Cousins makes a telling distinction: “In some ways James is smarter intellectually, but not nearly as instinctive. They’re very different sorts of people.”
Others suggest James Packer is a lot less passionate and a lot more calculated than his father, very much like the bankers and corporate advisers with whom he keeps constant company.
Observes Richard Walsh: “Kerry looked uncomfortable in a suit. James looks like he was born in a suit.”
And perhaps ironically, given that the younger Packer’s interest in the business of gambling was seeded by watching his high-roller father at the tables, there’s no evidence he enjoys it himself. It makes sense: no one would know better that the house always wins.
Of course, there are similarities. Like Kerry – and unlike Sir Frank, who was a dyed in the wool Tory – James knows the political game is best played by hiring help from both sides of politics.
Walsh again: “He’s learnt his political skills from his father. He’s possibly even better than his father.”
And the independent, anti-gambling senator Nick Xenophon, having watched Packer’s lobbyists doing the rounds in Canberra, underlines the point.
“He knows how to do it,” Xenophon says. “With the likes of Helen Coonan working one side and Mark Arbib working the other, he’s got his bets covered.”
Perhaps the biggest difference between the Packers, pere and fils, is that one was in business for the game, the other is in it for the money.
Ask anyone who knew Kerry and they’ll tell you he loved the media business. No one says that about James.
Money means different things to different people. Even for different rich people. Bill Gates is about charity. America’s Koch brothers are about ideology. Kerry Packer famously observed that it was about “toys” – that the bloke who died with the most toys was the winner.
For James Packer it seems to be about something sadder. All he really wants, says several sources, is to prove he can make more of it than his father did.
And so he zips about constantly, building his empire. Meanwhile, another marriage has hit the rocks. His ex-wife, Erica, now lives with their three children in Los Angeles.
Back in Sydney, their Vaucluse mansion, with its 13-car garage, 23-metre indoor pool, private cinema, et cetera, completed just before the split, sits empty. The house is kind of a metaphor; it looks a lot more like a casino than a family residence.
“I’ve made a bunch of mistakes in my life,” James admitted to Forbes last month. “I’ve had my ups and downs. Business is good right now, but now my personal life is a disaster.”
Indeed, business is going gangbusters. He will get his new casino built, and they will come, the hordes of visa-enabled Chinese high rollers. They will smoke indoors, in a building much bigger than it might ever have been. And Packer will take their money, and pay the most modest of taxes on these losses that are his gains.
What James Packer wants, James Packer usually gets.
This article was first published in the print edition of The Saturday Paper on Apr 12, 2014 as "The Crown prince of Sydney Harbour ". Subscribe here.