Billion dollar pub fight heats up
Records continue to be broken in Sydney’s billion dollar pub buying spree.
Three of Sydney’s hospitality billionaires continue to try to outdo each other in a pub buying frenzy that has set the country’s commercial property industry alight.
Stuart Laundy, Justin Hemmes and Sam Arnaout continue to buy up big on the back of 01 per-cent interest rates and happy-to-lend banks.
Over the past financial year, a record $1.3 billion worth of hotels has traded nationally with the three hospitality entrepreneurs leading the way.
Laundy is motivated by advice he received many years ago from billionaire Lang Walker who told him, ‘If you can buy or rent something with water in front of it, you can’t go wrong’.”
Laundy took the advice to heart.
Over the past past three months, Laundy has acquired two waterfront pubs on the Northern NSW east coast for just under $70 million.
He isn’t done yet.
Merivale boss Justin Hemmes looks to be competing hard.
Hemmes acquired four venues in the last month alone, including his first foray outside NSW, the Lorne Hotel perched on Victoria’s Great Ocean Road.
He also picked up a holding in Byron Bay where he intends to build a major hospitality complex.
Rumours have it that Hemmes is also eyeing off a neighbouring Byron Bay development site.
Iris Capital boss Sam Arnaout, has a vast portfolio including waterfront mega pubs including The Narwee Hotel which he purchased recently for $40 million, wineries and hotels.
Arnaout also recently picked up the $105 million Priscilla Queen of the Desert hotel and casino pub in Alice Springs.
If there is one industry that looks to have survived COVID and is now thriving it is the commercial real estate side of hospitality.
On this note Laundy tells Inside Sydney, “Maybe it’s part of this internalising of Australia that has come with the boom in domestic tourism and shutting the borders because of Covid but I think we have genuinely returned to an age, sort of what happened in the 70s and 80s, which is that pubs are seen as this community godsend again,” he says.
“They’re so many things to so many different people.
“You can take your kids there. You can have a fantastic meal. You can watch sport there and sit in a beautiful bar or bistro and look out at the water or whatever, depending on where you are.
“And some might argue that their value is in poker machines but that’s just not the case anymore.
“Like a lot of people we are doing away with a lot of our machines. Because if Covid has taught us anything is that the era of poker machine dominance is over and now these new style of pubs have so many more wings.”
Sydney hotel broker Andrew Jolliffe of HTL Property agrees that pubs are the first to bounce back.
“Because even in a global financial crisis or whatever, they are the first to bounce out … the first to rebound,” Jolliffe says.
“Banks do their own due diligence and, like anyone would do in their position, they want to back certain operators who compete effectively in the market.
“They’re keen to provide them with the ammunition for their guns, so to speak.
“And hotels are appealing on a number of levels … most are always in prominent positions, geographically.
“They are almost always on a corner on a high street. Whether that’s regionally or in the CBD.
“They’re a hub. And that property is so valuable, from a commercial perspective.”
Which is why the pub billionaires are going head to head.
However, while there is a friendly rivalry, that is all it is despite reports of Hemmes and Laundy constantly facing off.
“There’s a bit of a beat-up around a rivalry around Justin and I but when we see each other we’re friends and business is business,” Laundy says.
“I have said this quite often but if I manage to isolate a hotel that (Hemmes) hasn’t gotten involved in yet I question the seller. I think; “Why don't you have two horses in this race? I mean, we both have hefty cheque books,” he laughs.
Meanwhile, supply remains plentiful, meaning there’s enough to go around for everyone with plenty of room for consolidation as well.
Paul Waterson, CEO of the private equity-backed Australian Venue Co. says, “I think the average publican owns an average of 2.3% pubs and I think that’s why you are seeing so much consolidation. Because pubs really are one of the last fragmented industries remaining in Australia.
“Of the total licensed venues we hold 1.6 per cent. Hemmes has 0.8 per cent. The Laundys have 0.3 per cent.
“So while there is that perception that the market is being swallowed up the reality is there is plenty of aggregation opportunities for a very long time to come.”
Irit Jackson, 8th June 2021
