The formidable partnership of Endeavour Group and Charter Hall have teamed up to buy Chris Feros’ trophy Terrey Hills Tavern for close to $40 million.
Last month Endeavour Group (ASX:EDG) completed its exit from the Woolworths empire, and major shareholder Bruce Mathieson flagged the unshackled entity would be aggressively pursuing new pub acquisitions.
Representing its first Sydney purchase in more than a decade, EDG’s pubs arm ALH has resumed a strong alliance with property funds group Charter Hall, which is paying around $26.3 million for the Terrey Hills freehold. ALH will assume a new 15-year lease for $13.5 million to make up the balance.
“The Endeavour guys and Charter Hall have been really good to work with getting this deal over the line,” offered vendor and Feros Group CEO, Chris Feros.
When the pub came to market, in May, Feros hinted at plans for the group in the works, and confirms he and family patriarch Nick Feros are “very close” on further news.
“Selling Terrey Hills opens up a lot of opportunity for me. We’ve got a lot that we want to do, and we’re really excited that this is going to allow us to move forward.
“Dad’s really excited about the next chapter that we’re moving into.”
The deal continues a strong relationship with Charter Hall as ALH’s partner of choice in Opco-Propco acquisitions, currently including around 70 assets with combined value of over $1.3bn.
It also represents a fresh deep-pocketed player in the market, in the wake of the growing relationship between the listed HPI and Australian Venue Co (AVC).
“We recognise that an opportunity to acquire a Sydney metropolitan hospitality asset of this land size and asset quality is rare and we are pleased to be working with ALH on strategically growing the portfolio while also deepening our partnership,” reported David Harrison, Charter Hall CEO.
Feros Group is predominantly based in the Sutherland Shire, in Kirrawee, Taren Point and Caringbah, and Terrey Hills Tavern has long been a geographic outlier, on 1.6-Ha in Sydney’s far north. The northern beaches have not escaped the red hot market, seeing Iris Group pay $65 million for Manly’s The Steyne in 2019, and $57 million for the nearby Ivanhoe Hotel in February this year.
Charter Hall is well capitalised and already the largest owner of freehold pubs on blue ribbon leases in Australia. It operates the Long Wale Investment Partnership (LWIP), backed by Hostplus and Charter Hall’s own Long WALE REIT, which will now count Terrey Hills on the books.
EDG’s float was one of the biggest to date for 2021, valued it at around $11bn, comprising the Dan Murphys and BWS liquor chains, and Australian Leisure & Hospitality (ALH) operating 332 pubs, holding over 12,000 gaming machines. The company holds the freehold on 49 of the fleet.
Listing on the ASX included Woolworths and Mathieson each retaining 14.6 per cent of the new entity.
Relatively free from the parental PR problems associated with buying pubs, in particular their gaming, EDG plans to step up its buying, which will inevitably further shake up much of the national pub scene.
Opportunities in Victoria will be limited by the fact that ALH already owns a third of machine entitlements in the state, which is the specified limit for any one operator. To buy more pubs it must divest or downsize gaming in its existing Victorian portfolio.
Sale of Terrey Hills was managed through HTL Property’s Dan Dragicevich, Brent McCarthy and Andrew Jolliffe, who spoke to the virtues of the public campaign.
“It is broadly accepted within the asset class that AAA grade properties such as this are in scarce supply, hence the importance of ensuring both visibility and accessibility on a very public and national level was paramount to the outcome achieved,” Dragicevich said.
