One of Sydney’s most successful restaurants is facing the sale of its premises for the third time in just eight years.
The owners of two-hatted Surry Hills restaurant Porteño are watching the Cleveland Street site of their thriving events business being put up for sale for expressions of interest of more than $8.5 million.
“We’re tenants so it’s business as usual for us,” said co-owner Joseph Valore of the company that also operates its famed Argentinian lunch and dinner restaurant at Holt Street in the same suburb.
“There seems to be a lot of properties around town that are being sold at this stage, and this is the third time the building is being sold since we’ve been there. But it doesn’t actually affect the restaurant – if anything, it probably helps the sale having such a good tenant!”
The acclaimed restaurateurs operate the freehold premises, fitted out in imported South American style, at 358 to 362 Cleveland Street as an events space, catering for weddings, corporate functions and location venues. With dining downstairs and the cocktail bar Gardel’s upstairs, it has an increasingly rare late-night liquor licence until 3am.
The two-level building itself has three street frontages on Cleveland and Riley streets, a vast floor area of 750 square metres over two neighbouring lots and spectacular double-height ceilings. Porteño is leasing the space for an approximate annual net rent of $378,000 plus GST until 2020, when it has an option to extend for another five years.
“The owners bought it three to four years ago but they’ve now decided to sell,” said agent Darren Kable of Prime Commercial.
“They want to remain anonymous and they haven’t given us a specific reason why they want to sell.
“But it offers a good yield of 4.5 per cent a time when a lot of commercial property is being sold at less than 4 per cent. This is also a great opportunity to buy an iconic building and restaurant, with a great tenant who’s spent a bucket load on the fit-out, and is the kind of place that rarely becomes available.”
In a busy part of the Sydney city fringe, a short walk to Central Station and the upcoming light rail station, the site is also being billed as having development potential, subject to council approval.
Like most restaurants in Australia, Porteño leases their premises. In a survey earlier this year conducted by Restaurant & Catering Industry Association, 78.3 per cent of restaurants were found to similarly rent their buildings, slightly down from 85.8 per cent in 2016.
The association’s policy and public affairs manager James Coward said owning a premises does help restaurants in providing them with a little more stability. “Certainly, it’s a difficult business environment for restaurants at the moment, with the costs of operating, wages and online delivery services,” he said.
“So every bit of stability certainly helps. But it can be a double-edged sword in terms of tying up capital in a building.”
That might have been a possibility years ago for Porteño to buy their site, but these days, it isn’t an option, said Valore, who owns the restaurants with Ben Milgate and Elvis Abrahanowicz.
“It’s a big capital expense and brings up a lot of cash flow issues,” he said. “It might have been good to do it in the past, but now wouldn’t be a good time to buy for us. But we want everyone to know, we’re not going anywhere!
“We are tracking very well and we’ve put in a lot of attention to detail to create beautiful event spaces for the restaurant downstairs and the private bar upstairs. People love it and so do we.”