More pubs tipped to sell as optimism returns

In a strong nod to the residential market, the owners of St Kilda's Esplanade Hotel are understood to being considering offers for the freehold of the hotel

Sector specialist Ferrier Hodgson tipped that more freehold pubs would change hands as banks returned to the sector and listed groups had recapitalised after the global financial crisis.

It suggested that operators, investors and financiers wanting to exit could capitalise on the improved mood.

Corporate plays ranging from private equity exits by the backers of Redcape and Independent Pub Group to the ownership of the Coles pub empire outside of Queensland are on the table.

Coles, which has Australia's second largest stable of pubs, was holding on to pubs in Queensland, where liquor laws link ownership of two off-site retail liquor outlets to the ownership of a hotel licence, Ferrier Hodgson said.

The analyst said the future of Coles in Queensland looked assured.

"What it will do in the remainder of the country is still a question the retail giant appears to be grappling with," Ferrier Hodgson said.

Last year rival Woolworths cemented its position as the top pub operator in the country after its majority-owned ALH Group acquired a swag of pubs from the Laundy Hotel Group.

Ferrier Hodgson sounded a warning about the effect the tough new regime in NSW might have on the appetite for floats.

The Australian Pub Fund, which is backed by the MH Carnegie & Co private equity fund and businessman John Singleton, is the main float slated for this year.

"For operators with significant exposure to the NSW market, the appetite of investors for any prospective IPO will be tempered by the uncertainty associated with the present three-strikes legislation, the new precinct-based trading restrictions and the exposure to added operational risks for cashflow and asset value," Ferrier Hodgson said.

But the analyst was upbeat about the prospects of A-grade pubs, and some owners have moved to cash in on this sentiment.

Last week The Australian revealed that St Kilda's Esplanade Hotel, the longest continuously running live music venue in Australia, had been put on the market.

Affectionately known as The Espy, the business is being offered for sale through Matthew George of Jones Lang LaSalle, with the present owners keen to retain the freehold title to the prime rock venue overlooking the St Kilda foreshore.

However, in a nod to the strong residential market, it is understood that the owners may also consider offers for the freehold of the hotel, which was built in the seaside suburb in 1878.

Becton sold the pub and the freehold title to Paul Adamo and Vince Sofo, the then owners of the Chevron nightclub, in 2001.

According to company documents the business is presently owned by Elisa Sofo.

Source:  The Australian - 25 February 2014