Premium pubs are back on the radar of investors, with the $45 million sale of the Narwee Hotel in Sydney’s St George area setting a record for the year.
The Narwee hotel, a multi-storey property over 3370 square metres, has been snapped up by Iris Capital which also owns the Steyne Hotel in Manly, on Sydney’s northern beaches. The property has been owned and operated by the Ryan family for 33 years.
The deal tops the record $43 million paid for the Macquarie Hotel, in the Liverpool CBD, by the De Angelis family on behalf of Monarch Hotels in August. It also caps off a busy few weeks for the pub sector with a series of sales by the listed Redcape Hotel Group and Hotel Property Investments, as well as private players Moelis and pub tsar Justin Hemmes’ Merivale
The growing appetite of heavyweight buyers for top-tier properties comes as coronavirus restrictions for pubs and patrons are eased across New South Wales and Victoria.
Merivale boosted its portfolio last month paying $32 million for the Duke of Gloucester hotel in Randwick. Iris Capital, led by Sam Arnaout, also recently bought iProsperity’s distressed portfolio of 17 Ibis hotels from AccorInvest for $180 million.
“I’m delighted to have purchased the Narwee Hotel from the Ryan family, and recognise the significance of selling a business having owned and operated it since 1987,” Mr Arnaout said.
“The sale process was clinical, and the impressive presentation and positioning of the asset satisfied not only our key investment criteria, but also met a geographical objective we held for that part of Sydney.”
HTL Property chief executive Andrew Jolliffe, who advised on the deal, said established investors are acquiring A-grade hospitality properties at a time when interest rates are at record low levels.
“When we consider the origin of the most recent capital deployment events, it is almost exclusively linked to leading groups such as Redcape, Merivale and Iris Capital”, Mr Jolliffe said.
Meanwhile CBRE research’s Chinmay Chitale said despite trade conditions improving across the country, with the exception of Victoria, the pub industry faces a key litmus test over the next 12 to 18 months.
“JobKeeper payments are being gradually phased out and amnesty periods offered by banks are expiring, and this will place further stress on balance sheets in the future,” Mr Chitale said.
“Furthermore, rent abatements are due to kick back in with the additional 50 per cent rent to be added to existing rents over the remainder of lease terms.”
He added that pub businesses should take solace, however, from the federal government’s 2020-21 budget initiative to provide full capital asset deductions and loss carry-back provisions as a measure to reduce tax burdens and improve profitability in the future.
According to Mr Chitale, the measures should help take some medium-term pressure off their balance sheets.
Keep up with Commercial Real Estate news.