Listed entity HPI has announced a deal renewing the bulk of its leases to Australian Venue Co (AVC) and the partnership with Coles, bringing “confidence” in the future to all parties and the pub sector.
Hotel Property Investments (ASX: HPI) launched at the end of 2013, and has accumulated titles to 43 pubs in Queensland and three in South Australia.
A total of 42 of the Queensland operations are leased to either AVC or its JV on Coles pubs, Queensland Venue Co (QVC). The remaining Queensland asset is leased to the Woolworths-backed ALH.
The leases on 28 of the pubs were set to expire in 2021, prompting negotiations that led to today’s announcement. A new 15-year commitment has been finalised on 20 of the venues, and a 10-year deal on the remaining eight.
The agreement includes HPI contributing $30 million in capital expenditure over the next two years, in a program developed in conjunction with QVC to bring physical upgrades and improvements.
HPI CEO Don Smith says the lease extensions represent a win for both the freeholder and tenants.
“The pubs and retail liquor stores in our portfolio are attractive assets with strong growth potential.
“With an injection of cash and the expert management of QVC we see our portfolio primed for growth. The extended leases allow HPI to make these substantial capital investments with confidence.”
Since its news of the formation of QVC, parent AVC has focused on giving venue managers at the former Coles pubs the tools and support they need to foster bespoke and locally significant identities specific to their respective markets.
“Our strategy has always been to find the unique potential in each pub, bar or restaurant and make it shine,” says AVC CEO Paul Waterson.
“The sites acquired in our joint venture with Coles have proved to be strong operators in their own right and today’s announcement shows our continued long-term commitment to these venues’ success.”
Key works already flagged are a comprehensive $1.35 million makeover of the Palm Cove Tavern in Cairns, and a $2 million renovation of one of Queensland’s oldest hotels, the Wallaby Tavern in the Gold Coast.
Today’s announcement saw HPI shares up 4c to $3.400, representing 10.2 per cent annual compound appreciation since its launch.
