Charter Hall snaps up historic Gold Coast hotel in a $14.25M deal
Charter Hall’s acquisition of the Cecil Hotel on the Gold Coast continues its foray into hospitality real estate and the acquisition of pub assets.
The fund manager acquired the historic hotel – and nine tenants in a deal worth $14.25 million, reflecting a 6.71 per cent yield.
The popular hotel was built in the 1930s in an Art Deco style and is popular among locals and tourists. It includes a restaurant and 35 gaming machines.
This is the third time the hotel has been on the market since the COVID-19 pandemic, but this time around was sold prior to auction by RWC Gold Coast’s Jackson Rameau with “a very short 14-day cash unconditional settlement.”
“Post COVID, there was less market confidence in pubs whereas now, you know, it’s probably one of the most exciting asset classes,” said Rameau.
“We received 233 enquiries, and several groups re-engaged interest, having launched it for the third time online since COVID,” Rameau said.
Interest in the hospitality sector is surging and pubs are increasingly appealing to lenders due to their stable cash flow, diverse revenue sources, and the flexibility to enhance profitability by refreshing their offerings.
The Cecil Hotel’s former owners, local and Adelaide-based investors now in their late 70s, held the property for 25 years. Described as "delighted" with the sale, they were motivated to pass it on due to "health issues and advancing age."
Located on a sizable 1889-square-metre plot at the corner of Scarborough and Nerang Streets in Southport’s central business district, the property is leased to the Australian Leisure and Hospitality Group (ALH), which operates the hotel under a long lease until 2035, with two 10-year options to extend.
Besides ALH, which is a subsidiary of ASX-listed Endeavor Group initially founded by Woolworths, the property hosts eight additional tenants, including five street-front retail spaces occupied by established restaurants and cafes and three first-floor office suites, making it fully tenanted.
The property, thought to be the oldest public house on the Gold Coast, underwent a significant refurbishment in 2000 to diversify income streams, enhancing the look of the historic building while preserving its original name. Meanwhile, its namesake, the Cecil Hotel in downtown Los Angeles, has drawn attention due to a series of violent incidents, including at least 16 unexplained deaths over the years.
Rameau noted the strong interest in the property, which sold after 19 days on the market following six inspections and five offers or contracts prior to the sale. Charter hall acted quickly to secure the property.
“Both parties’ solicitors were in talks within 32 hours of the property relaunching online and all their due diligence was complete prior to auction with competition from four other parties prior to auction at various levels,” he said.
Charter Hall said the purchase was in line with its selective collection of pub assets.
“This acquisition continues Charter Hall’s selective acquisition of pub assets leased to the dominant national operators, and deepens its well-established relationship with Australia’s leading hospitality operator and owner of ALH, Endeavour Group,” a statement read.
Recently, Charter Hall, in partnership with superannuation fund Hostplus, made an improved $757 million bid to acquire pub landlord Hotel Property Investments (HPI), but HPI rejected the offer despite a 5.5% increase, with its board reiterating that there was "no reason to sell the portfolio" without a compelling proposal.
Jonathan Jackson, 29th October 2024
