Sale frenzy continues around hotels as blue-chip assets, seeing an ALH pub in Brisbane set a new benchmark, as Melbourne’s Zagame family cash in more chips.
Culminating its coming to market in July, the Royal Exchange Hotel in Brisbane has been sold by public auction.
Occupying a generous 2,453sqm, the Royal has one of the State’s most famous beer gardens, adding to its multiple bars, gaming lounge, BWS bottleshop, and three satellite bottleshops.
The popular pub is tenanted by the newly-listed Endeavour Group (ASX:EDV) and its pub arm, ALH, on a 25-year triple net lease plus four additional 10-year options. It has been one of the stable of pubs held by ALE (ASX:LEP), all leased to ALH.
The auction was conducted online, and bidding began just under $10 million on a reserve of just over $11 million.
There were five active bidders beyond the reserve, including two parties with a string of hotel assets, but the winner was a private Gold Coast family that holds multiple commercial assets outside of the hotel industry.
2021 has already seen ALE divest four other ALH-tenanted properties, achieving a blended yield of 4.4 per cent.
ALE noted on sale of the Royal Exchange a passing adopted yield of 4.38 per cent, while the result achieved a new record for ALH-tenanted freeholds, at 4.01 per cent.
There are rumours this record may not be held long, in the wake of another ALH freehold sold in Victoria that reportedly dipped below the four per cent mark.
This comes as the Zagame family – cashed up from their $99 million sale of four leases – puts freehold of the Edwardes Lake Hotel in Reservoir to market.
The Edwardes Lake is one of those recently sold to the Francis family, for around $21.5 million, on a 48,900sqm site in Melbourne’s northern growth corridor. The Zagames still operate Zagame’s Caulfield Hotel.
IPR Hotel promptly rebranded the Zagame pubs, changing the Reservoir edition to the Edwardes Lake Hotel.
The AFR reports price expectations on the large-format Reservoir to be $29-$30 million.
It is for sale via Expressions of Interest, through JLL Hotels and Cropley Commercial, closing Thursday, 2 September.
The Royal Exchange campaign was managed by HTL Property and Burgess Rawson.
As pub assets show their resilience, agents suggest investors are looking at the sector in a new light, realising the value of having a business in the portfolio that can continue some trading even through lockdowns.
“We’ve seen how resilient pubs have been, and investors are willing to jump in to what for them is a relatively unknown sector, on the basis that even as bad as things are and so many things are closed, parts of these businesses can still operate – if not do well,” offers Glenn Price, HTL director.
