Financial services giant Moelis Australia has secured an exclusivity agreement for potential purchase of the iconic Beach Hotel at Byron Bay for a record-setting price of “above $100 million”.
The Beach, known locally as the ‘Top Pub’, began life in the 90s, built by Paul Hogan off-sider John Cornell, for around $9 million. The big 4,585sqm site includes 100 metres fronting Byron’s main beach, offering a lively public bar, swimming pool, beer gardens, restaurant, function rooms, bottleshop and 25 luxury hotel rooms.
In 2007 Cornell sold the asset for $60 million, former racing driver Max Twigg setting a record for a passive freehold, with Melbourne-based publican John van Haandel taking the management rights, with lease options for 30 years.
Ten years later, in 2017 Twigg put the freehold back to market, finding buyer for $70 million in Impact Investment Group (IIG), representing a sharp 6.3 per cent return. The lease remained with van Haandel, the tourist town business paying annual rent of more than $4.4 million.
IIG, focused on sustainability and community impact in its investments, kept the Beach largely untouched except for the removal of its 15 gaming machines, selling the valuable licences and converting the former space into the ‘Green Room’, showcasing the best of the region’s food and beverage produce.
Just under two years since IIG took the reins, it joined with van Haandel in September to offer the combined Beach Hotel freehold and management to market, for only the second time since its construction.
Marketing literature suggested the stakeholders were looking to offers around $100 million, posing upside in the Hotel’s large lot and unrealised potential.
IIG reports the process drew over 100 enquiries from “around the globe” and a short-list of four parties offering bids exceeding $100 million.
Both IIG and the van Haandel family were eager to find what they saw as the right new custodian for the asset, aiming to consider both community sensitivities and best commercial outcome.
This amounted to strict terms of sale – most notably including a long-term moratorium on operating gaming machines at the venue.
The buyer is also expected to undertake significant initial investment and improvements in the property, and specify a level of staff retention.
The van Haandels themselves became Byron Bay residents some time ago, and are keen to pass the legacy onto a worthy and capitalised new owner.
“It’s really important to Lisa and I that the incoming party respects the township’s needs and invests in the property and the many exciting new business initiatives and ideas that are available,” says John van Haandel.
Speaking of the announcement, Redcape Hotel Group and Moelis Australia Hotel Management (MAHM) CEO Dan Brady says they conducted extensive focus groups with locals and short-timers, to better understand the best outcome for the pub, and get a direction on upcoming works.
“We see a tremendous opportunity in terms of really bringing the spec of the hotel up,” he explained. “Keeping in mind that the pub hasn’t been as a freehold going concern since 2007, it’s been in an op-co / prop-co arrangement, which really doesn’t allow it to meet customer preferences.
“We’ll be looking to do a meaningful refurbishment there over the whole site, which it really needs, but we’ll do that through a community consultation process in a way that’s sensitive to the market, so we end up with something that really does suit the iconic nature of this hotel … that really captures the Australian pub culture and identifies with it being a regional, country hotel thematic climate.”
As per the agreement, the bulk of staff and management will stay on. Moelis intends to engineer a single asset investment fund – to sit independent of its existing hotel funds – providing sophisticated players opportunity to invest in the Beach Hotel.
The Redcape vehicle will be amongst entities with opportunity to invest in the offer, which Brady reports it will assess over time.
The focus groups yielded a strong community concern for the fate of hospitality workers in the tourism hub, and touting its long-held practise of auditing records twice yearly to ensure all staff are being properly compensated, the broader Redcape portfolio could bring expanded potential to the future of Byron Bay workers.
“Local jobs are really important for people. When we look at the sorts of things the people in the community want, it’s great pathways for the young people to have careers in industry, and certainly who we are, we can provide great jobs in that local area but also other areas.”
The deal remains subject to finalisation of sale and purchase agreements, with expectation negotiations will conclude over the coming weeks.
