Adelaide has cemented itself as the latest feeding ground for pub investment, as a reported $100 million worth of pub sales are announced, including Harvest’s new fund and a record price by ALH/Endeavour.
The surge of transaction activity has been led by Greg Maitland’s GM Hotel Group, which is one of the largest stakeholders in Adelaide, divesting the Emu Hotel and bottleshop in Morphett Vale, Christies Beach Hotel, and the Brahma Lodge Hotel, for a total of nearly $75 million.
Sale of the Emu Hotel and retail outlet for $32 million is believed to be the largest price ever paid for a single pub asset in Adelaide.
The Hotel occupies a lot of circa 7,300sqm, incorporating public and bistro bars, a large bistro, entertainment room, gaming room with 40 EGMs, a large drive-through bottleshop, and a separate leasehold bottleshop in the adjoining Woolworths-anchored Morphett Vale Shopping Centre.
It was bought by ALH Group, Endeavour’s pubs arm, in conjunction with its biggest landlord, Charter Hall Group, which took the freehold.
The Christies Beach Hotel was sold to RD Jones Group, founded by the late Richard Jones and wife Denise, who still runs the operation. The pub holds a 4,250sqm site, including public bar, bistro and bistro bar, large drive-through bottleshop, gaming room with 35 EGMs, and motel rooms.
Also in the announcement was sale of the completely renovated, award-winning ‘Lodge’ Hotel of Brahma Lodge, purchased by the highly acquisitive Sydney-based Harvest Hotels.
This modernist styled Hotel, situated on a sprawling 12,157sqm, features a large centralised public bar that connects to the bistro, gaming room with 34 EGMs and direct access from the car park, back lounge, outdoor areas, and separate, drive-through bottleshop.
It also counts 17 accommodation rooms, which are currently unused.
GM Hotels offered the three pubs to market in early 2019, along with the Crown Inn and Beach Hotel in Seaford, looking to $70 million for the collection.
“We’re very happy with the outcomes in what is a significant period of transition for the Adelaide hotel trading landscape following recent changes in gaming legislation, and wish all purchasers every success with these irreplaceable large-format suburban assets,” offered MD Greg Maitland.
Harvest Hotels raised $50 million of committed equity in its recent Harvests’ Fund 3, looking to focus on large-format pubs in the Adelaide suburbs.
This has begun bearing fruit with announcement of purchase of The Lodge and also the Aussie Inn, in Hackham, acquired from Hackham Community Sports and Social Club.
The Aussie is located on a 13,270sqm corner of Main South Street, featuring a public bar and gaming room, bistro with both indoor and outdoor dining space, a large deck, kid’s playground, drive-through bottleshop, expansive surrounding grounds and ample parking.
These make the nineth and tenth venues in the Harvest portfolio, and directors Chris Cornforth and Fraser Haughton report they are looking forward to entering the South Australian industry when they assume operations in coming months.
Cornforth notes the large blocks of the hotels offer potential for development for further accommodation, citing the new acquisitions as well-run operations that will “generate strong, diverse revenue and return” for its investors.
“Having spent over 12 months researching the market and pub scene across Adelaide, we’ve been diligent and particular about finding the right pubs, with attractive valuations and strong existing earnings that will allow us to grow.
“We’ve worked closely with operators, suppliers, brokers and locals in Adelaide, and believe The Aussie and The Lodge are the perfect pubs to bring us into the Adelaide pub sector and kickstart Fund 3.”
It’s thought the ramped-up activity in Adelaide is being driven by years of strong earnings growth and the promise of higher returns than Sydney, Melbourne and Brisbane, as yields in Adelaide typically reflect seven to eight per cent, versus many recent sales dipping to five per cent or lower on the east coast.
Furthermore, trading trajectories of Adelaide hotels are seen as favourable, in the wake of new gaming legislation bringing South Australia in line with other states.
The freehold going concerns of the GM Hotels were brokered by JLL’s John Musca, with The Lodge and The Aussie in association with Terry Board.
