Sydney pub market may have bottomed out

One of Australia's largest sports managers, Paul Nash, has sold the Olympic Hotel in Sydney's inner east for $5.15 million - less than half the 2007 purchase price of $10.6m.

The loss for Mr Nash, whose West Australian-based company Corporate Sports Australia manages AFL stars including Daniel Kerr and Aaron Sandilands, shows that the pub sector is still feeling the pain from the 2009 downturn, according to industry analysts.

It is understood the undisclosed buyer plans to focus on accommodation for the 30-room hotel and bar, adding to his existing portfolio of up to six properties in Sydney's inner Darlinghurst area. Mr Nash purchased the hotel, a 10 minute walk from the Sydney Cricket Ground and Allianz Stadium, in the hope of attracting sporting clubs, but some say this became redundant as the former Olympic stadium at Homebush began to attract more sporting fixtures.

"If you look around Paddington, there's nothing much happening any more," a local said. "It's no longer a sporting precinct, it's got the cricket and that's it."

Sports manager Paul Nash lost money on the sale of the Olympic Hotel for $5.15m. He bought the property near the SCG for $10.6m in 2007.

The deal was brokered by Hamish Henderson and Justin Rose from Deans Property.

A number of inner-city pubs have closed or been converted into eateries since 2010, with the market correcting from the price boom of 2007 and 2008 when the likes of Queensland businessman Tom Hedley bought in.

Since then, in the inner-Sydney suburb of Surry Hills, the Forresters hotel and the Carrington hotel have been converted to restaurants. So was the Norfolk Hotel in Redfern, Buckland Hotel in Alexandria, the Oxford Hotel in Darlinghurst and the Commercial Hotel in Balmain.

Also in inner Sydney, the Annandale Hotel was sold last month for $2m after being valued at $3.5m six months earlier.

While returns were strong for high-end gaming venues, poker machines in smaller pubs were bringing in less revenue and many were being removed, sources said. It is expected that conversions will continue in the debt-ridden Sydney pub market. The trend is also accelerating in regional NSW. Newcastle's Queens Warf Brewery was last week placed in receivership, to be managed by McGrathNicol.

At Port Stephens on the NSW coast, the Seabreeze Hotel, once worth more than $8m, was sold this month by a local developer for less than $6m.

However, CBRE agent Daniel Dragicevich, who brokered the deal with Joel Fisher, said the pubs market was improving.

"With the lowering of interest rates and change in federal government, consumer spending is on the rise, which is in turn boosting buyer sentiment and helping to drive positive activity in the pub sector," Mr Dragicevich said.

As for other regional pubs, the Wicklow Hotel, in the northern NSW township of Armidale, sold at an auction last Thursday for $2.6m, well below its value at the market's peak.

Agents Mike Wheatley of Knight Frank and Murray Gilchrist of Gilchrist Business Brokers were the agents involved.

Today another Armidale hotel, the Railway Hotel, will go under the hammer in another test of the market.

Source: The Australian, 31 October 2013