Market confidence boosting demand for pubs

The Australian pub property sector has performed well recently with sales of the likes of the Hotel Bondi and the $500 million Woolworths-owned portfolio.

A the end of 2013, yields were expected to compress with a major drag on the pub investment market in 2014 predicted to be a lack of quality stock as the availability of assets was projected to tighten.

In reality, the past year has been a busy one for pub sales, as investors have taken advantage of lower borrowing costs and a rise in demand for higher-yielding assets.

Daniel Dragicevich, the director of CBRE Hotels, who recently sold the Rose and Crown at Parramatta, said the hotel market, while still segmented across location and asset type, is generally very buoyant as vendors look to take advantage of the current market confidence.

“As the market sees a generally positive hotel trading environment, as well as clear legislative movement, investors have the opportunity to consider the A-grade properties when they enter the market,” Dragicevich said.

"Demand outstrips supply for many asset types as favourable lending conditions continue to prevail, on-premise trade is strong and the legislative environment remains relatively clear. This is underlined by the abundance of new entrants to sector as well as continual re-investment by the traditional hotel families."

The activity has increased in the past six months - pubs such as Hotel Bondi and the Palms Hotel are among those sold through John Musca of Jones Lang LaSalle, while The Tea Gardens in Bondi Junction was also sold to publican John Purkis by Andrew Jolliffe of Ray White Hotels.

Additionally, Jones Lang LaSalle Hotels and CBRE Hotels have been appointed to offer the ‘freehold-only’ interest in the exclusive Golden Sheaf Hotel, Double Bay, for sale by expressions of interest.

Source:  The Shout - 22 October 2014