Pub deals are signed while longtime owners call the last drinks

A brand new lease is offered with an initial term of ten years and numerous other options. The retail price is expected to be around $8 million.

Other recent deals showing the jump in value and reflecting significant improvements by owners include the Corrimal in North Wollongong, which was purchased by Damian Kelly’s Pub Invest in 2016 for $10 million and sold for $32.5 million last March .

Another is Windsor Castle in the Hunter Valley, which was originally purchased in 2015 for about $10.5 million and sold for $51 million last year.

JLL chief executive John Musca and senior vice president Ben McDonald, who advised on the Oaks hotel deal, said many generations of families have exited the hospitality industry to capitalize on “voracious demand” for the sector.

“Transaction activity in the asset class is at a two-decade high nationwide, which is unsurprising given the superior weight given to hotel revenue and the very limited number of assets per capita that will ever be available for acquisition — we’re seeing unprecedented consolidation,” Musca said.

McDonald added, “The opportunity to acquire hotel properties that monopolize strong retail locations deserve ‘unicorn’ status and are likely to be held from generation to generation by new buyers.”

“The sector enjoys an inherent advantage in the relative affordability it can offer at a time of general price increases for food and beverage options.”

MA financial fund manager Daniel Hargraves

“We don’t see that changing any time soon if the supply of assets continues to decrease.”

HTL Property national director Dan Dragicervich and managing director Andrew Jolliffe, who sold the Strathfield and Hollywood hotels, said they saw renewed market interest in cross-generational hospitality assets, which also hold the possibility of further improvement; such as significant levers for residential development or other alternative uses.

“Therefore, there was considerable market appeal for an asset that embodied virtually all of the fundamentals that astute participants in the asset class were so quick to seek,” Dragicevich said.

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Poker machine revenue is also important to shoppers and has kept the value of some pubs high, but is generally overshadowed by revenue from food and drink sales.

Pub operators are reluctant to comment on the proposed changes to gambling legislation until after the NSW general election on March 25.

In general, pub brokers said the auction of machine entitlements in early 2022 was instrumental in setting a new bounty that now ranges from $625,000 to $675,000 after averaging under $300,000 in 2020.

But a big deal from MA Financial started the trend that poker machines weren’t the main attraction. The fund bought the Beach Hotel in Byron Bay in November 2019 for $100 million, then an industry record, from John “Strop” Cornell — who paid just $9 million for the site in 1990.

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But there are no poker machines in the pub and the new owners firmly believe it will stay that way.

MA Financial Fund manager Daniel Hargraves said the outlook for the pub sector is positive, particularly for those making a difference and with strong community involvement.

“The sector enjoys an inherent advantage in the relative affordability it can offer in times of general price increases for food and beverage options,” said Hargraves.

“This should translate into continued demand and a new flow of customers looking to enjoy their local facility, ensuring revenue remains relatively resilient as they have in previous economic downturns.”

He said the local hotel’s simplicity as a reliable, relatively inexpensive and high-quality form of entertainment provides a viable option for people to continue to interact with one another – “as they have for over 100 years”.

Vanessa Rader, Ray White’s head of research, said late 2022 sales for NSW had eclipsed the full calendar year 2021. She said after many generations of assets came to market after enduring the most difficult trading period for many owners and operators, “we are seeing new highs being made as low interest rates and a growing pool of buyers quickly focused on the asset class.” .

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