Pub sales toast to bounteous year
A new round of sales and potential new floats will dominate the pub sector in the coming year, with more than $50 million having changed hands in the past two months.
Private investor Anthony Medich paid $6 million for the Centennial Hotel at 88 Oxford Street, Woollahra, from Cos Psaltis, and it is expected there will be a newly launched restaurant joint-venture at the pub with celebrity chef Justin North.
Two of the biggest sales this year, yet to be finalised, were by Coles of The Palms at Chullora for $22.5 million to Iris Capital and the Long Jetty at Wyong to private investor Peter McDougal for $4.9 million.
In November, Coles put the assets on the market as part of its continued non-core pub divestment.
The potential float of the Australian Pub Fund is still to be finalised.
The sales come as the NSW pub sector works through the new late-night closing regulations introduced by NSW Premier Barry O'Farrell. Pub investors say most hotels will be immune, because most have midnight closing times. Only those with 3am closings will be affected.
Other recent sales by Jones Lang LaSalle Hotels pub investment sales director John Musca and associate Sam Handy include the Lansdowne Hotel, Chippendale, for $6.2 million to the owner of the Oscars Hotels chain, and Triple 888 Hotel, Chinatown, for $10 million to a private chinese investor.
Late last year the Jacksons on George Hotel in the city was bought for $23 million by developer Lend Lease, while the Lantern Hotel Group bought the Crown Hotel, Surry Hills for $15.5 million.
Mr Musca said he was not surprised to see a rush of hotel transaction activity in the last half of 2013 as recognition of the differential between hotel earnings and the cash rate inevitably transcended market investment malaise.
"The movement of the equity markets towards yield will preface interest in larger suburban hotels, where earnings histories are transparent, barriers to entry highest and growth manifestly evident," he said.
Andrew Jolliffe, managing director of Ray White Hotels Australia, said he had spoken to a number of major lenders during the past week and all were pragmatic about the likely impacts of the proposed legislative amendments.
"Fundamentally, hotels are well positioned businesses with both loan-to-value ratios and interest cover ratios in better than good working order," he said.
"Few industries are as resilient as the hotel industry."
Mr Jolliffe sold the Plumpton Hotel for about $20 million last year and the Ray White Hotels Darwin office recently sold two hotel assets, with Woolworths hotel arm Australian Leisure and Hospitality rumoured to be the buyer.
"Darwin and the Northern Territory are emerging markets and hence key strategic objectives for our national business," Mr Jolliffe said.
A new deal on the market is the Carrington Hotel at 563 Bourke Street, in Surry Hills, being sold by the private group of investor Greg Magree, Drink'n'Dine.
The inner-city venue forms part of Drink'n'Dine's pub portfolio, which includes the renowned Forresters and Norfolk hotels.
Dan Dragicevich and Joel Fisher, of CBRE Hotels, who have been appointed to sell the venue, said the sale was in line with Drink'n'Dine's expansion strategy.
"Having entered the industry initially with the 2009 purchase of the Norfolk Hotel, Drink'n'Dine has expanded rapidly, adding to its stable of five venues with the recent reopening of the Oxford Hotel in Petersham," Mr Dragicevich said.
The sale marked the first time Drink'n'Dine had sold one of its venues, and the divestment would free the group up for further expansion.
Drink'n'Dine co-founder Jaime Wirth said the decision to sell was bittersweet. "It's difficult parting with any of our venues, but we have decided that streamlining the group is best for the immediate future."
Mr Fisher said the sale came after a watershed year in 2013 for the pub market, where yields had sharpened considerably and sales activity had continued to grow.
"There is a resounding appetite from current players, as well as new entrants for quality metro assets. This can be directly attributed to continued low rates and a lack of stock available," he said.
