Australian Venue Co’s Harlow in ‘Silicon Yarra’ is being sold and expected to attract strong and varied interest, as hospitality continues to shine and PAG finalises its billion-dollar acquisition of the group.
The pub is located on a 485sqm corner site with frontage to Church and Lesney streets, amid a high concentration of international headquarters, co-working and creative spaces.
The multi-level building is 1,100sqm, providing bar and dining space at street level, a basement bar, a sprawling split-level beer garden, and picturesque rooftop bar.
AVC’s current 25-year lease runs to 2039 with two further 10-year options. The group is currently paying $517k annual rent, with three per cent annual increases and market review at option.
Previously known as the Great Britain Hotel, AVC undertook a $3.7 million refurbishment and opted to extend its lease (to 2039) ahead of time.
AVC holds a portfolio of 210 venues across Australia and New Zealand, and exercises an aggressive capex program to optimise returns.
PAG Asia Capital signed agreement to buy the group in August. It was aiming to complete in November, but was forced to wait for regulatory approvals including by the Foreign Investment Review Board.
The deal will finalise this week, seeing PAG pay $1.45 billion for an 80 per cent controlling stake in AVC, valuing the business at more than $1.81 billion. The delay required PAG pay around $50 million more for the entity, which will now include an additional 10 properties acquired since August.
AVC is projected to generate circa $210 million EBITDA this financial year. It reports it is looking at over a dozen more purchases by the end of June, and aims to do 25 more renovations per year for the foreseeable future.
The sale of landmark Melbourne pub freeholds is all too rare, and the sector has seen some of the tightest cap rates in the country.
In mid-2015 the freehold of the Imperial Hotel Melbourne – also now operated by AVC – occupied at the time by Open Door Pub Co, sold at auction for a razor-sharp 3.6 per cent, and in early 2016 Bobby Zagame’s Marine Hotel at Brighton fetched $13 million, representing a 3.8 per cent return.
Sale of Harlow is through Fitzroys’ Paul Burns and Chris James, via an Expressions of Interest campaign closing Wednesday, 27 March.
Cremorne and Richmond are seen as “very hot” CBD-fringe locations, and agents are suggesting sale price of circa $9.5 million, equating to around 5.5 per cent yield.
“Australia’s hotels market has shown incredible resilience in the past few years, reflected in PAG’s recent backing of AVC,” says Burns.
“Whilst Harlow is undoubtedly a hospitality investment, because of its location in Cremorne/Richmond it will appeal to many more investors than just hospitality investors.”
