Plenty of cheer for pubs
The past year has been one of the busiest for the pub sector, with more than $200 million in assets changing hands through single properties and portfolio deals.
Agents in the sector say demand is growing for well-run, high-quality pubs that offer redevelopment opportunities and have an attachment to the community. As shown by the Marly in Newtown and the Annandale Hotel, sales have been at realistic prices and the buyers are unencumbered with debt.
This is a far cry from five years ago, when numerous pubs were put into the hands of receivers as their owners overcapitalised and could not meet crippling repayments.
Funds and families have returned to the market. The Laundy, Bayfield and Short families, among others, have been active, as is the Australian Pub Fund, run by Paddy Coughlin and Rod Kelly with backing from John Singleton, Geoff Dixon, Mark Carnegie and Allan Johnston.
Toga Group also has moved to capitalise on activity in the market with the sale of the former Mansions Hotel in King Cross. CBRE Hotels' Joel Fisher and Daniel Dragicevich will market the ground-floor stratum, which is beneath The Manor apartments in Bayswater Road.
Mr Dragicevich said the sale campaign coincided with increased investment activity in the Sydney hotel market. CBRE Hotels has sold nine hotels in 2013, most recently, the Moonee Beach Tavern for about $4 million and the Bristol Arms Hotel in the Sydney city centre for about $8 million.
"We have certainly noticed more buyer enthusiasm, which has been fuelled by a dilution of legislative risk as well as the cost of funding being at historically low levels," Mr Dragicevich said.
"Corporates and larger investment groups are driving the majority of activity. However, for the first time in years, we are seeing various new entrants targeting the hotel sector, which is helping to underpin buyer competition."
Toga acquired the high-profile Mansions Hotel site in early 2011 and is in the final stages of redeveloping the upper floors of the building into 43 apartments. The basement and ground floor levels were stratum subdivided to provide for the new hotel venue.
Mr Fisher said the 888-square-metre stratum provided the opportunity for a buyer to construct, fit-out and launch their own venue in the coveted Kings Cross precinct.
"The location benefits from significant foot traffic and passing trade, which was reflected in the strong historic cash flows generated by the Mansions Hotel. The stratum also includes a hotel licence with favourable trading conditions and 30 gaming licences," Mr Fisher said.
Other sales in Kings Cross over the past year include the Crest Hotel for $65 million, the Empire Hotel for $12 million and The Bank in Darlinghurst Road for $4.55 million.
The managing director of Ray White Hotels, Andrew Jolliffe, said the back end of this financial year had seen significant activity, starting with his sale to Redcape of the Belrose Hotel for $23 million and concluding this month with the sale of the Tall Timbers pub in Tasmania and offers and acceptances on another five Sydney freeholds.
"The key reason for this substantive activity can be indexed to the spread between the low cost of funding and the yields at which pubs can be purchased. This is a phenomenon that isn't going to change for some time," Mr Jolliffe said.
Oxford Commercial Hotel's director Adam Spencer-Carr, who sold East Sydney Hotel for $3 million, said more investors were looking at hotels as cash-flow propositions.
"In the case of East Sydney, accommodation revenue played a key role in the marketing of the hotel," Mr Spencer-Carr said.