The perfect storm is driving coastal and regional popularity and sharpening yields, and pubs in growth areas have never been more in vogue.
Hotel Cessnock is the latest in a trail of assets scooped up by strong operators and prudent investors.
The prominent two-storey brick pub enjoys the full complement of amenities, including bistro and commercial kitchen, adjoining courtyard, beer garden, parking, 17 accommodation rooms plus a two-bedroom manager’s residence, and gaming with TAB and 12 EGMs in full smoking solution.
The Hotel is tenanted on a 10 + 10 lease, paying net rental of $210k, and located in the heart of Cessnock, around 50 km west of Newcastle.
The freehold interest sold to a passive investor for a price equating to a sharp eight per cent yield, strongly reflecting the appetite for the sector. It was marketed by Sydney-based Manenti Quinlan & Associates in conjunction with Newcastle’s Moore & Moore Real Estate.
“The demand for investment hotels is being driven by investors seeking alternatives to the volatile equities market and low earnings on cash investments,” Gerry Quinlan told PubTIC.
“Commercial, industrial and retail investments are viewed by many investors as bland. Hotels are not. They are secure investments, with value underpinned by gaming licences.”
Specialising in this kind of transaction, Quinlan leads a chorus of commentary recognising the new breed of hotel investor. At the coal face, he notes the increasing shortage of available pub assets and suggests new listings are being measured in hours rather than days.
In early August Quinlan cited four regional sales in seven days. One of these was the Mayfield Hotel, on a landmark 1,600 m² site on Maitland Road in the Hunter Valley region. It included a similarly generous ‘regional’ layout, with bistro, three outdoor areas, drive-through bottle shop, parking, three-bedroom self-contained manager’s residence, TAB and gaming room with full outdoor solution and 15 EGMs.
The week prior saw the sale of Lantern’s Lawson Park Hotel in Mudgee for $4.05 million. Drawing 57 enquiries, the listed company’s CEO John Osborne described the divestment campaign as “tailor made to attract both investors and operators”.
Quinlan confirmed “a competitive tussle” occurred between the two types of buyers, with an investor finally winning the battle. He added that the Lawson Park’s value was similarly ‘underpinned’ by 15 EGMs, and noted the inherent value in the region to investors.
“Mudgee is one of the State’s leading regional tourist destinations, with 524,000 annual visitors and the town hosting over 50 community events and festivals annually.”
And last month, local operators beat out the investors at auction to grab the lessor’s interest of the Racecourse Hotel, in the Newcastle residential growth corridor of Wallsend. Buyers Mark and Tracy Keegan are long-standing and high-profile hoteliers in Newcastle.
The sale price of $2.1 million represented a very tight yield of just 6.19 per cent, and the veteran Quinlan suggests the haze has cleared in place of the storm.
“Demand for investment hotels has reached a new high,” he states.
“Investment hotels had been undervalued by the marketplace compared to other investment class assets … this is now being corrected.”