Mystery local buyer pays $15.75m for Mornington Peninsula pub
The Dava Hotel near Mount Martha on Victoria’s Mornington Peninsula has set a new return benchmark for pub investments after selling to a local buyer for $15.75 million on a 2.7 per cent yield – 140 basis points below the cash rate.
The previous lowest return for a pub investment is attributed to the Tudor Inn on the Nepean Highway in Melbourne’s south-east which traded on a yield of 3.8 per cent when it sold to Golden Sun Investments for $15.66 million in 2021. (At the time the cash rate was 0.1 per cent).
A very low yield reflects strong underlying demand for an asset – the Dava Hotel attracted 18 tenders to purchase – as well as high underlying land value and development upside.
In the case of the Dava, it occupies a 1.55-hectare ocean-fronting site on the Esplanade, between Mount Martha and Mount Eliza. It was marketed as one of the best land-banking opportunities on the Mornington Peninsula.
However, it sold with more than 12 years remaining on the current lease to casino pioneer John Haddad’s Taverns of Victoria, meaning the incoming buyer will have a long wait before being able to redevelop the property fully.
Stonebridge’s Rorey James, Nic Hage and Kevin Tong joined Ben Wilson from Wilson Property to market and sell the Dava Hotel.
Originally built as a boarding school in the 1920s, the property was redeveloped as The Dava Lodge Hotel and Guest House in 1935. It has undergone many changes since then and has no heritage protection.
The current owners of the freehold – Chris and Peter Dash – had run the hotel for several years before leasing the venue out for the past 18 years. The Dashes paid $5.15 million for the site in 2001.
Offering panoramic views across Port Phillip Bay from its rooftop deck, the Dava Hotel sold with a spacious modern bistro, TAB, public bar, gaming room with 32 machines, outdoor kids play area and large drive-through bottle shop.
The Mornington Peninsula is a popular holiday and lifestyle destination. The wealthy enclaves of Portsea and Sorrento are about a 40-minute drive from Mount Martha.
The sale of the Dava Hotel follows ASX-listed Endeavour Group striking a deal to buy the large-format Rye Hotel on the Mornington Peninsula for about $50 million, though that deal is being reviewed by the competition watchdog.
Also on the market in the Mornington Peninsula is the St Andrews Beach Brewery, part-owned by cricketer David Warner.
Stonebridge Property’s Rorey James was unable to identify the Dava Hotel buyers due to a strict confidentiality agreement, but said they were “big property owners” on the east coast.
Given the low yield, Mr James said it was clear the incoming buyers would buy the Dava Hotel with mostly cash and “without help from the banks”.
Mr James said land-rich investments such as the Dava were the ones “you wanted to sell”.
“To receive six offers reflecting yields sharper than 3 per cent speaks volumes of the markets’ medium and long-term confidence in the retail and hotel sector, particularly given the more than 12 years of tenure remaining on the lease,” he said.
Stonebridge’s Asia practice partner Kevin Tong said 44 per cent of bids received were from Asian-based investors and land bankers.
“We also received bids from investors backed by Indonesian, Chinese and Singaporean capital which further highlights the confidence this buyer profile has in the Mornington Peninsula market,” Mr Tong said.
