Pub sales are coming back after a quieter year with investors looking for well-located and well-managed businesses that will offer better returns than the more traditional office and retail assets.
With the national pub market experiencing a year of moderating transaction activity in 2023 and following record transaction volumes in 2022 of about $2.2 billion, JLL agents said they have seen an uptick in buyer engagement and deal flow “suggesting a level of pent-up demand and satiated capital seeking deployment opportunities in the space”.
JLL executive vice president Ben McDonald said price discovery was a key theme during 2023 as the market stared down the barrel of a shifting debt landscape, including aggressive interest rate hikes and proposed legislative changes.
McDonald said there is about $200 million of asset sales due to be announced in the coming months. One that is highly anticipated is the Oaks pub in Sydney’s Neutral Bay.
One of the latest sales is the Corindi Beach Hotel on the NSW North Coast to the North Coast Hotel Group, which owns and operates several pubs in proximate locations including Coffs Harbour and Grafton. NCHG spokesperson Harry Barry said he is “absolutely delighted to bring this great hotel into our mix and will take over the business in mid-February”.
“The resilience of the sector has always been a drawcard for investors and a key investment pillar for the long-term private operators and family groups that largely control the space.”Ben McDonald JLL Hotels and Hospitality Group
It was sold by regional pub baron Rod “Ned” Kelly, who is focusing on his assets in and around Mudgee in NSW. No sale price was disclosed.
Originally known as the Amble Inn, the rebranded Corindi Beach Hotel sits on an enormous 16,120 square metre site about 30 minutes north of Coffs Harbour.
The sale was advised by JLL Hotels and Hospitality Group senior vice president Kate MacDonald and vice president Greg Jeloudev, who said that with forecast residential growth of 25,000 people over the next 20 years, and ongoing infrastructure development, “the region continues to gain momentum not only as a top tourist destination, but as a first-choice residential location as well”.
“Corindi Beach Hotel’s earnings continue to grow from the single bar, bistro, gaming room with 12 gaming machines with approval for an additional eight, and the only drive-through bottle shop for 10 kilometres,” MacDonald said.
She said there were more than 90 enquiries and four formal offers through the sale campaign, amid the shifting economic and legislative environment. Of the bidders who missed out, MacDonald said there is about $50 million of capital that is available to be invested in other pubs in the area.
In Melbourne, there is the impending settlement of the Rye Hotel, which followed an extended period of uncertainty that ended when Australian Competition and Consumer Commission (ACCC) approved Endeavour’s acquisition in December last year.
Will Connolly, senior vice president of investment sales at JLL Hotels and Hospitality Group said settlement will be the last drinks for long-term owners the Haughton Family, marking the end of 50 years of family ownership.
Connelly said an renowned boutique hotel located in one of the state’s most popular tourist destinations has also come to market, being the Hotel Frangos, Daylesford.
“We’re delighted to present such an iconic venue to market,” Connelly said.
“Hotel Frangos is the first of a slew of opportunities our team are currently preparing to take to market across Victoria in the coming weeks, in particular a major inner-city Melbourne pub, which will no doubt be one of this year’s most significant opportunities within the pub sector when introduced to market in the coming weeks.”
According to McDonald, the resilience of the sector has always been a drawcard for investors and a “key investment pillar for the long-term private operators and family groups that largely control the space”.
He said with the holidays over and a slight resetting of capitalisation rates – a measure of return and risk on real estate assets – “it certainly feels like the market is hunting for opportunities already”.
“With a marked decrease in transaction volumes year-on-year in 2023 and patient capital on the sidelines for the best part of 12 months, we’re now seeing an undercurrent of transaction momentum building across the country,” he said.
HTL Property managing director Andrew Jolliffe said that “despite inflationary headwinds, there still exists an unsatisfied depth of equity looking to be invested into the pub sector”.
The group advised on the sale recent sale of the Seabreeze pub on the NSW Mid North Coast from the well-known Short Family empire, with a price tag of about $33 million to the privately owned Hunter Hotel Group.
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Source: Thanks smh.com