Pub sales have now moved north to Newcastle as investors seek strong yield and income-producing assets away from the tightly held Sydney market.
In what is expected to be one of the larger sales in the city of Newcastle, the 96-year-old Kent Hotel is tipped to generate more than $25 million, based on recent deals, one being the Elanora Hotel in Gosford selling to John Singleton’s investment arm Bonython for $23 million.
Singleton, who was part of the consortium that sold the Steyne Hotel in Manly through HTL Property for more than $60 million to pub operator and owner Iris Capital, has earmarked the NSW Central Coast and Hunter Valley as the “growth engine of the state”.
In January he opened Gosford’s $4 million Bon Pavilion, which he is developing through his company, Bonython.
The Kent has been owned by the private Hunt family since 2002, and they have decided to test the bullish pub market. The family have appointed HTL Property’s Andrew Jolliffe and Dan Dragicevich on the sale.
The agents said the Kent hotel is a multi-level venue generating annual revenues in excess of $8.3 million, boosted by a gaming room and expansive food offerings.
Other big name Sydney hoteliers such as Andrew Lazarus, Marcus Levy, Simon Tilley, Dan and Sean O’Hara, Mark Malloy, James Hannon and Riversdale’s Matthew Beach have all recently acquired a foothold in the area.
HTL Property managing director Mr Jolliffe said it is expected that the Kent will draw a consistent profile of high-level interest with similar sales reaching more than $25 million.
“About 18 months ago we started to pick up a change in the narrative and focus of Sydney-based hotel groups looking to the Newcastle and north coast area for opportunities to invest capital at a discount to the fiercely contested metro markets,” Mr Jolliffe said.
“What was initially a value bet investors were waging has now, through the radical transformation of the Newcastle CBD and transport infrastructure, morphed into a high conviction and mid to long-term investment strategy of having money out to work in a reliable and growing local economy.”
Mr Dragicevich said that in the past 11 months, HTL Property has sold five Newcastle region freehold hotels for a combined $60.5 million, representing significant investment as well as clear business confidence in the area.
“These were highlighted by the sale of the Shaft Tavern in Elermore Vale to Sam Arnaout’s Iris Capital for $11.75 million and the investment by Mr Singleton,” Mr Dragicevich said.
It is expected that with the lower interest rates and potential changes in regulation for lending by the Australian Prudential Regulation Authority, there will be more cash flow available for pub investments that offer high income returns and strong yields.
“With continued downward pressure on interest rates, the emerging prevalence of non-traditional sources of funding and the struggle between supply and demand perpetually imbalanced, we are maintaining our market guidance that yields will contract further before they consider any form of augmentation,” Mr Jolliffe said.
Also coming to market is the Beauford Hotel in Mayfield. This large format suburban venue has been owned by the Kearney family for over 30 years and is one of the few hotels left in Newcastle still in the hands of private owner-operators.
HTL Property director Blake Edwards said interest is expected around $5.5 million.
“The hospitality market in Newcastle has always been very strong, however is further underwritten by an airport now welcoming international flights, a government-funded light rail project which complements the huge private investment into the Revitalising Newcastle project set to rejuvenate the CBD,” Mr Edwards said.
“Additionally, Newcastle is perfectly positioned to take advantage of short-stay demand for world class beaches and Hunter Valley vineyards in Australia’s first wine region.”
Another pub in NSW’s Hunter Valley, the Bank, is also on the market by the private Clancy family, for the first time in nine years.
The pub at East Maitland is being sold as a freehold going-concern hotel and comes at a time of larger-scale commercial developments in the Hunter region. Mr Edwards and HTL Property sales executive Xavier Plunkett are the agents.
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