Jaz Mooney’s Oxford Hotels has executed a sale-and-leaseback at its Grand Hotel, making hay in a hot market ahead of lingering uncertainty.
Stronghold Investment Management, based in Brisbane, has paid a reported $13 million for the freehold of the landmark Grand Hotel and neighbouring properties, while Mooney’s operation remains on a 10-year lease agreement.
The sale through CBRE Hotels’ Paul Fraser increases Stronghold’s hospitality portfolio to around $70 million.
The Grand is a large-format icon of the town, built 1926, and famous for its ‘Crocodile bar’. It also holds a casual lounge and dining area, 35 gaming machines, drive-through bottleshop, six adjoining retail shops and a former service station, used as a hire depot.
Significantly for Cairns, which is finding a serious shortage in short-term, 6-12-month lets, the site includes around 3,100 sqm of land allowing a 14-storey development. Stronghold plans to realise the full potential of the property, according to director Steve de Nys.
Oxford Hotels, trading as Pelathon, exercised an option to buy the freehold in 2019 for $8.5 million, after having managed it under lease for the previous 18 months.
Oxford MD Jaz Mooney came to Australia from Ireland in 2006, strategically avoiding much of the calamity that befell Ireland and the UK during the GFC.
While most of his fleet is in Queensland, and still currently trading, he says business is tough, especially in the capital, and he sees now as a good time for him to go to market and clear some debt.
“I’m not a developer, so I’m not going to develop a big high-rise accommodation structure, even though there’s a real need in Cairns.
“But the primary reason, like we all should be watching, is loan to value ratios, to make sure we keep an eye on all those banking covenants. Like everybody, I’ve no idea what’s going to happen in the next two to five years.”
Finding the existing business models shaken by closures and lack of cashflow, Mooney suspects hotels may find knock-on problems in the near future, as patrons consider the merits and logistics of different sized venues, and what will inevitably be increased costs around compliance and regulation post-COVID.
He believes closed venues and hospitality in general will bounce back, but wonders for how long, suggesting operators need to cover all bases.
“It crystalises your thinking, that’s for sure. I’m certainly not going to do the last 18 months again.
“I take my hat off to people that have done well over the last two years, which have been challenging, but if you don’t look at the challenges and recognise what they are you can get caught.”
