Lantern has taken the money and run, “meeting the market” for the deeds on its Bundaberg freehold to complete the exit from Queensland.

In June, ASX-listed Lantern (LTN) listed the freehold going concern of the Central Hotel, Bundaberg, in a collaboration with the tenant, owner of the leasehold.

LTN has been selling down assets around the country, in likely preparation for a probable dissolution of the entire portfolio, at an average premium to book value so far of 14 per cent.

But while the best of the ‘non-core’ assets have largely been in areas bereft of real estate stock and hospitality opportunities, there is no such shortage in Bundaberg, and at least two other local pubs are rumoured to be currently finding little luck achieving a reasonable price for a sale.

LTN’s ASX announcement noted its share of the Central Hotel sold for $1.95 million, which is 22 per cent below the 30 June, 2016 book value for the freehold. Sources say the total sale price was close to LTN’s book value, which could be seen as meaning the operation, rumoured to be struggling, was not seen as of much value.

In the release, LTN CEO John Osborne states that following a comprehensive sale process, the Board determined “meeting the market for this asset would yield a superior financial outcome than investing further and waiting for the local market to recover”.

The Hotel’s campaign was through CBRE Hotels, which declined to comment on the sale, but pointed to the emergence of a “two-speed market” in Queensland, where big venues in the south-east are in hot demand, while regional centres, many negatively affected by the mining downturn and the extended drought, are doing it tough.

“This sector of the market has also been impacted by the lack of purchasers willing to take a chance and potentially ride out the rocky road ahead,” CBRE’s Paul Fraser told PubTIC.

“Assets that have sold in these areas have typically been heavily reduced in price in order to secure a sale. Some of the banks are also closely looking at this style of asset, which could see some properties fall into receivership in 2017.”

Located near the coast, just north of Hervey Bay and Fraser Island, Bundaberg has been hard hit by its reliance on agriculture, impacted by both the drought and ban on live cattle exporting. The local economy has declined at the rate of five per cent annually for the past seven years.

But many pubs in the larger metropolitan areas, particularly those surrounding Brisbane and on good blocks of land, are thriving.

Operators and investors alike, many newcomers from NSW, are reportedly hunting down opportunities, chasing higher yields than are available in other States. A new syndicate led by hotelier Peter Ashelford grabbed the Treetops Tavern for $20 million, then Colonial Leisure Group broke into Queensland with the purchase of Brisbane’s big Fox Hotel.

“Pub sales have continued to generate strong results this year, despite there being a decrease in the overall number of sales,” said Cameron Harris of CBRE Valuations in a recent market review.

“The decrease in available assets has driven tighter yields across the sector as demand far outweighs supply.”

In this environment CBRE is carrying out its campaign on the large-format Homestead Tavern, in North Brisbane. Fraser says the campaign is not yet complete, but there is no shortage of potential buyers.

“We’ve received over 40 enquiries for the property over the course of the campaign and any one of the 10 front runners could end up owning this asset.”

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