The whole freehold going concern portfolio of MPK Hotels’ NSW pubs has sold to newly-formed syndicate Investment Management Group Hotels in the biggest deal of 2021 to date.
MPK has divested the Royal Hotel at Orange, Dudley Hotel at Bathurst, Castlereagh Hotel at Dubbo, and the Federal hotels at Wellington and Mudgee, in a deal thought to be circa $75 million.
Sources suggest the Royal sold for around $24 million, taking the record for the town from Jason Marlow, buying the Robin Hood just days earlier. The other four transactions are similarly thought to be records for their respective towns, although prices have not been disclosed.
MPK Hotels has been led by hoteliers Nick McKechnie and Nelson Kelly, who have built a valued portfolio over the past decade through clever acquisition and asset improvement. This has most recently included purchasing the pubs at Mudgee and Orange, in late 2019.
The two partners’ decision to sell now is said to have not come lightly, as they hold approved DAs for smoking solutions at three of the pubs and begin to enjoy the first uptick of population shift to the central west.
But recognising the importance of “leaving something in it for the next bloke” they sought a portfolio sale to someone that recognised the significant upside.
“We’ve worked full time together in this business and we’ve decided it’s time to spend more time together away from work, and with the kids, before they pack up and move away,” offered Kelly, who met his wife Mandy working at the South Dubbo Tavern, built by his father many years earlier.
“We love the pubs and the staff that run them and it will be business as usual for our loyal customers.”
McKechnie shares the view that it’s time to hand over the keys and look to other interests, where they can.
“I’ve spent the best part of the last decade on the road. I’m not sure my wife is ready to see more of me, but my kids are.”
Investment Management Group Hotels (IMGH) is led by Andrew Turnbull and Matthew Clowry, bringing experience in fund management, property development, financial and accounting services, human resources and hospitality.
The MPK suite represents the first hotels acquisition for the Canberra-based investment firm, which plans to retain key staff in the businesses and nurture them into higher roles. McKechnie and Kelly will also stay on for a period to help ensure a smooth transition.
IMGH is attracted to the growth across the central west of NSW. It recognised strong maintainable earnings across food, beverage and bottleshop departments and the 110 poker machine entitlements across the five hotels, as well as passive income through robust accommodation revenue out of Dubbo and Orange.
The new owners plan to activate the approved DAs and capitalise on evolution in the region.
“The MPK ownership team has done an impressive job of growing this iconic portfolio of hotels and developing best in class teams to support their success,” says Clowry, IMGH CEO.
“Our intention is to leverage these foundations to extend and evolve the hospitality experience for the people of Orange, Bathurst, Wellington, Mudgee and Dubbo.”
McKechnie says they engaged Nick Butler of Pub Brokers & Advisory last year to campaign off-market for a price they wanted for the five assets.
This package sale leaves MPK with two leasehold hotels, one being Dubbo’s Western Star Hotel, which it leases from a passive freehold owner. This is now also on the market, as a re-stapled freehold going concern. The other is the Coachman, in Parkes.
“This is obviously an important sale and adds plenty of weight to the theory that strong regional assets deserve to be held in the same esteem as the larger metro pubs,” offers Butler.
In an era of private equity keeping an ambitious eye on the hotel industry, in a record low interest rate environment, Butler notes that it comes down to simple economics and buying assets that will provide excellent returns.
“The pub space is earthy and grounded, based on the skill of its people, the inherent value of the building and land and the importance of these places in the community.
“Once you get those aspects right, the return on investment naturally follows.”
