Latest Gaming Update - New Legislation
Following the request from a number of clients I have prepared the following to outline the changes to our current Gaming Legislation , size and values in the marketplace.
The Gaming Machines Amendment (Leasing and Assessment) Bill 2018
Introduced to Parliament 6 Mar 2018
Passed Parliament 14 Mar 2018
Assented: 21 Mar 2018
To commence on a day to be appointed by proclamation.
https://www.parliament.nsw.gov.au/bills/pages/legislative-process-explained.aspx
When an Act or clauses of an Act come into force by proclamation, this date is determined by the minister (Paul Toole) who, on behalf of the Governor, places an announcement in the Government Gazette shortly before the date of commencement. It should be noted that not all clauses of an Act will come into force at the same time.
The Government is required to lodge notification with the Parliament of all legislation remaining unproclaimed after 90 days.
Industry sources are indicating that the proclamation will take effect in the next 10 to 14 days. (as at 10:30am there was no notification in the Gazette of proclamation)
This Bill provides amendment to the Gaming Machines Act 2001.
Major Changes:
Previously hotel banding was based on Local Government Areas. This is to be changed to Statistical Area Level 2 as represented by the Australian Bureau of Statistics.
http://www.abs.gov.au/websitedbs/D3310114.nsf/home/Australian+Statistical+Geography+Standard+(ASGS)
Statistical Areas Level 2 (SA2s) are designed to reflect functional areas that represent a community that interacts together socially and economically. They consider Suburb and Locality boundaries to improve the geographic coding of data to these areas and in major urban areas SA2s often reflect one or more related suburbs. The SA2 is the smallest area for the release of many ABS statistics, including the Estimated Resident Population (ERP), Health & Vitals and Building Approvals data. SA2s generally have a population range of 3,000 to 25,000 persons, and have an average population of about 10,000 persons. SA2s are aggregations of whole SA1s.
Following is the link to the map for "Find my LIA Banding"
Use this map to zoom in on a hotel, where you will find what banding, how many gaming machines, region, unfilled quota etc.
For the buyer of Gaming Machine Entitlements
A Threshold Increase Application allows a hotelier to increase the number of Entitlements at a hotel.
The following link outlines the process: https://www.liquorandgaming.nsw.gov.au/Documents/gaming-and-wagering/community-action/gl4014-class-1-local-impact-assessment-process-guidelines.pdf
This Link guides you to a flow chart that will determine which LIA you need to lodge - |
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For the Seller of Gaming Machine Entitlements
Single country transfers:
Remain as in the past. No forfeiture.
Available where Gaming Machine Threshold is 8 or less machines
Only one every 12 months
(Note provisions in sale without forfeiture - cannot be done inside 12 months of a single country transfer)
Sale of Entitlements with forfeiture:
A hotel may now sell 2 blocks (6 PME's) per year to the Metropolitan with forfeiture.
(Previously 1 block)
Sale of Entitlements without forfeiture:
One of the major changes to the current market place.
Gaming Machine Threshold must be 6 or less.
Can be multiple transactions - however must be completed at the same time.
Transfers will result in GME's being 0
The hotel is not able to hold gaming machines for 24 months
Leasing Gaming Machine Entitlements
Hotels with a Gaming Machine Threshold of 10 or less may lease entitlements.
Receiving Hotel must have Gaming Machine Threshold to allow additional entitlement
A standard form of lease is to be used (annexures covering physical machines etc. will be added)
No sub-leasing permitted
A GME cannot be transferred while it is leased.
All persons with a financial interest in the hoteliers license must agree to leasing the entitlement
Levy to be paid at the time of application - 5% of the total of all lease payments for the term of the lease.
So What does all this mean?
Demand for Gaming Machine Entitlements have increased. A number of Metropolitan Hotels have been reclassified under the new bands, allowing them to add additional machines.
Value for an entitlement to the Metropolitan area are $180,000 - $190,000 per machine landed.
It has been indicated that increased demand will see this rise as metropolitan hoteliers are approved to increase their Gaming Machine Threshold
There are other factors affecting entitlement values. Recent Liquor & Gaming decisions have restricted Metropolitan Hoteliers to purchasing Band 2 & Band 3 entitlements. Those with entitlements for sale in these levels should consider requesting a premium (smaller supply again)
Single Country Transfers appear to be around the $130,000 to $140,000 mark (although supply is drying up).
Hoteliers should lodge a Gaming Machine Threshold Increase prior to entering the marketplace unless there is no LIA requirement.
Country Hoteliers can divest of Gaming quicker …. Sell double the blocks per year to Metro and even better; lease, then sell.
I am advising all hoteliers who are considering selling GME's to gain an opinion from their accountant as to the taxation ramifications of such a decision.
Being a country lad I would prefer to see the capital value remain in the bush and not just give all our jewels away to the Metropolitan.
Attached is a Graph that was obtained from Liquor & Gaming, showing all sales (Values include GST).
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Hotel |
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Metro to Metro |
Country to Country |
Country to Metro |
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Month |
Total Apps |
Apps >= $1,000 |
Number Transferred |
Average Price |
Total Apps |
Apps >= $1,000 |
Number Transferred |
Average Price |
Total Apps |
Apps >= $1,000 |
Number Transferred |
Average Price |
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Jul-14 |
0 |
0 |
0 |
|
6 |
6 |
7 |
$93,214 |
4 |
4 |
8 |
$115,625 |
|||||||
|
Aug-14 |
5 |
5 |
16 |
$115,625 |
1 |
0 |
0 |
$0 |
3 |
3 |
8 |
$117,187 |
|||||||
|
Sep-14 |
1 |
1 |
2 |
$115,000 |
1 |
1 |
1 |
$90,000 |
0 |
0 |
0 |
$0 |
|||||||
|
Oct-14 |
2 |
2 |
4 |
$117,500 |
6 |
6 |
8 |
$97,500 |
2 |
2 |
4 |
$109,773 |
|||||||
|
Nov-14 |
4 |
4 |
8 |
$119,375 |
3 |
3 |
10 |
$100,000 |
3 |
3 |
6 |
$118,333 |
|||||||
|
Dec-14 |
4 |
4 |
12 |
$119,583 |
6 |
6 |
7 |
$90,714 |
4 |
4 |
8 |
$124,375 |
|||||||
|
Jan-15 |
2 |
2 |
8 |
$123,750 |
2 |
2 |
3 |
$122,333 |
0 |
0 |
0 |
$0 |
|||||||
|
Feb-15 |
2 |
2 |
4 |
$116,250 |
3 |
3 |
3 |
$93,333 |
3 |
3 |
6 |
$117,500 |
|||||||
|
Mar-15 |
2 |
2 |
6 |
$128,333 |
2 |
2 |
2 |
$95,000 |
2 |
2 |
4 |
$123,750 |
|||||||
|
Apr-15 |
4 |
4 |
12 |
$126,458 |
7 |
5 |
5 |
$93,000 |
2 |
2 |
4 |
$125,000 |
|||||||
|
May-15 |
5 |
4 |
14 |
$134,500 |
3 |
3 |
3 |
$94,166 |
0 |
0 |
0 |
$0 |
|||||||
|
Jun-15 |
4 |
4 |
24 |
$145,500 |
2 |
2 |
3 |
$95,000 |
2 |
2 |
4 |
$130,455 |
|||||||
|
Jul-15 |
9 |
8 |
26 |
$153,825 |
9 |
8 |
8 |
$96,875 |
7 |
7 |
14 |
$145,714 |
|||||||
|
Aug-15 |
8 |
7 |
22 |
$148,864 |
2 |
2 |
3 |
$98,332 |
3 |
3 |
6 |
$153,333 |
|||||||
|
Sep-15 |
4 |
3 |
8 |
$162,375 |
7 |
6 |
6 |
$98,333 |
2 |
2 |
4 |
$155,000 |
|||||||
|
Oct-15 |
2 |
2 |
4 |
$162,500 |
3 |
2 |
3 |
$120,000 |
3 |
3 |
6 |
$158,333 |
|||||||
|
Nov-15 |
1 |
1 |
2 |
$161,000 |
5 |
5 |
7 |
$120,000 |
5 |
5 |
10 |
$162,000 |
|||||||
|
Dec-15 |
5 |
5 |
16 |
$162,869 |
2 |
2 |
3 |
$150,000 |
8 |
7 |
14 |
$165,389 |
|||||||
|
Jan-16 |
1 |
1 |
2 |
$190,000 |
4 |
4 |
15 |
$118,394 |
1 |
1 |
2 |
$162,500 |
|||||||
|
Feb-16 |
2 |
2 |
4 |
$165,000 |
4 |
2 |
2 |
$132,500 |
1 |
1 |
2 |
$182,500 |
|||||||
|
Mar-16 |
3 |
3 |
6 |
$194,166 |
4 |
3 |
4 |
$146,250 |
3 |
3 |
6 |
$181,666 |
|||||||
|
Apr-16 |
1 |
1 |
2 |
$185,000 |
7 |
5 |
6 |
$142,500 |
7 |
7 |
14 |
$182,856 |
|||||||
|
May-16 |
0 |
0 |
0 |
$0 |
2 |
2 |
2 |
$135,000 |
2 |
2 |
4 |
$183,750 |
|||||||
|
Jun-16 |
5 |
4 |
9 |
$180,555 |
7 |
7 |
11 |
$174,669 |
2 |
2 |
4 |
$185,000 |
|||||||
Note: Average Price includes GST
The above demonstrates how small this Gaming Machine Entitlement marketplace truly is.
In NSW the top 300 gaming Hotels (by profit ranking) have room for approx.. 400 machines….. this is creating the demand.
I have suggested a figure of $500 pw (ex. GST) for a Gaming Machine Entitlement to lease. This will include a modern machine. The hotel receiving the lease machine (lessee) to pay the Community Benefit Fund approx. $1,300 for the 12 month lease. Proof will be in the marketplace when it commences.
My advice for now is be patient, values will not fall significantly, demand will continue to increase -and as such values should increase. It will take time for hoteliers who want to purchase to have their LIA's approved. Be patient.
Regards
Nicholas Tinning
0417 252199
Hospitality Brokerage, Liquor Licensing, Management Consultant
