If you ask Mr McDonald (Of Hamburger chain fame) what his main business is, he will tell you that it is real estate not the hamburger chips business. You see, McDonald’s buys land in under-developed prime real estate areas, builds a McDonalds on it and rents the place to a mug who will run a hamburger joint in it set up with their absolute rules. If the place goes bust it is no skin of the McDonalds Corporation and the land prices under the building will have gone up if they gambled the right way making them a mint.
To understand what is happening in Auckland you have to understand what Sky’s business is and while gambling brings in a handsome amount of money, their main business is real estate too.
Now before you call me racist for pointing out that it will be primarily the Chinese who will be doing the buying consider the following.
The Chinese economy is collapsing. This is due to their best customer, the US, being in a bit of economic trouble and the European countries sort of on the verge of a financial meltdown. There is of course Russia but compared to the US and Europe that country is relatively small. In China there is a lot of popular unrest and the people are getting very fat up with the corruption in the upper echelons of power as their jobs are disappearing and the apartments they bought in the huge empty cities build to get them to buy those apartments are turning out to be huge losses as people are not able to sell them against profits.
The demands for investigations into corruption are such that most of the families of the Chinese elite have already left China and the elites who own the banks and control the Chinese state bank are printing billions of dollars out of thin air to buy up as much real estate abroad as they can in order to secure their wealth.
So back to Sky city and their real estate business.
With the concessions for more gambling facilities greatly out stripping the need for local gambling enthusiasts they have increased the value of whatever monstrosity they are going to build on the land they secured manifold already.
They make money gambling at the moment but that is just icing on the cake. Their REAL profit will not come from gambling so much as the real estate they are going to be building in the centre of a city which is at the moment, like every big city in the world, in the throws of an epic housing bubble.
What they are hoping for is that this bubble will last a bit longer and when they are done building you might find that a huge Chinese conglomerate will be happy to buy it for an exorbitant sum coming from the Chinese elite trying to get their ill gotten gains out of the country before it collapses.
The Chinese rich love gambling and they will be happy to travel to this wonderful “Cheap”country to gamble and buy land and houses, driving up the prices to the point of making Kiwi’s tenants in their own country.
This is not just happening here. This morning I read a Dutch news paper article about 8 hotels being build (Dutch but do a translate on it to get the gist) by the Chinese to accommodate only Chinese travellers and business people.
In California the Chinese are building a suburb for Chinese buyers only. In London they are going to build an entire business area and they are building several huge developments targeting Chinese buyers.
The only thing Sky City did when asking for more money was just about their alternative on the side business of gambling. They gambled and they lost but they will be winning big time when they sell their great big ugly elephant to the Chinese.