Fletcher Building to build SkyCity convention centre

Work on the development is expected to get underway by Christmas.

Fletcher Building's [NZX: FBU] construction unit has won the $477 million contract to build a convention centre, five-star hotel and associated infrastructure for SkyCity Entertainment Group [NZX: SKC] in Auckland the casino and hotel company agreed with the government in exchange for gaming concessions and a licence extension.

Work on the development, which SkyCity says amounts to a $700 million total investment in the Auckland economy, is expected to get under way by Christmas, creating 1000 construction jobs for the term of the 38-month build, and generating an estimated 1140 jobs once the facilities are complete.

The partnership marks an extension of the relationship between SkyCity and Fletcher, which developed the original SkyCity site, Sky Tower and Grand Hotel. The two companies have entered a binding commitment and expect to sign actual building work contracts in November.

SkyCity says it has more than $300 million of undrawn bank facilities following its recent $125 million bond sale, giving it "sufficient headroom" to fund the convention centre and hotel projects. It plans to update investors on its long-term funding plans once it finalises its Adelaide expansion project, which is estimated to cost about $A300 million.

As part of the long-term funding plan, SkyCity is also exploring property-related options including the possible sale of its Federal St carpark and seeking external investors to fund and ultimately own the hotel. It has appointed JLL to help find investors for the hotel and expects to release an information memorandum in November, it said.

Under SkyCity's deal with the government, its increased gaming concessions become effective once the building works contract for the convention centre is signed. It gets 230 new electronic gaming machines, 240 new automated table games and 40 new tables.

It will also be able to expand its gaming to include the Federal St 'footprint', including the Grand Hotel and convention centre, and gets a gaming venue licence extension to 2048 from 2021.

The company expects to invest $54 million to activate the gaming concessions, it said.

SkyCity shares fell 0.8% to $3.91 when NZX trading began this morning. Fletcher opened up 0.4% at $7.42.

(BusinessDesk)