Investors pour into pubs
by Leon Gettler
Investors are snapping up pubs like never before with some significant sales in Melbourne pointing to a trend.
The Marine Hotel in Brighton owned by luxury car dealer Bobby Zagame was sold for $13 million.
Licensed for 50 gaming machines, the Marine was sold at auction last Thursday for a 3.86 per cent yield on net annual rental of $502,788.
It’s seen as a terrific deal.
"No gaming investment has ever sold for anything like a 3.8 per cent return," selling agent Cropley Commercial's Steve Cropley told The Age.
Mr Zagame has sold a a three-pub portfolio to capitalise on growing investor interest. It’s a portfolio that boasts the Seaford Hotel, which is one of the top 10 gaming pubs in Melbourne, the Royal FTG Hotel in Upper Ferntree Gully and Kondari Hotel in Hervey Bay, Queensland.
Those pubs were offloaded in March for $75 million to fund manager Charter Hall.
Gaming pubs are usually sold with tighter yields than traditional food and beverage venues. The extra income generated by pokie machines guarantees that.
But food and beverage hotels are also proving to be attractive.
Bidders were pushing a price up to %8.61 million for the Metropolitan Hotel in William Street in the Melbourne CBD, attracted by the yield of 2.38 per cent.
Similarly, the Great Western Hotel at 204-208 King Street is reportedly to be close to being sold for about $6.5 million. It’s offering 2.6 per cent net rental return. The location could well see it being redeveloped.
One bidder Lazaros Papasavas, who owns multiple city buildings, said he was on the lookout for more assets in the CBC, That’s despite rising prices.
"We believe we understand the value of this market well and, despite prices increasing, we see great value in the CBD," Mr Papasavas said.
Only half of Victoria’s pokie pubs are owned by a small number of larger players including Woolworths-controlled ALH Group. The rest are owned or operated by community groups and clubs.
April 14th 2016
