Leo Tsekos has won the title to ALH’s Iron Horse Hotel with a cheeky last bid at the auction for the blue-chip investment property in the heart of Newcastle.
A strong crowd gathered for Burgess Rawson’s final commercial auction of 2016 last week, with 30 properties going under the hammer.
The highlight of the day was competition for the freehold title to the Iron Horse, on 1,861 m² of Cardiff, in Newcastle. Three bidders including property investor Les Tsekos vied for the prize, expected to attract strong interest due to its revenue covenants.
Australian Leisure & Hospitality (ALH) are under lease at the Hotel until 2032, with two 15-year options beyond that and a guaranteed rental increase of 3.5 per cent annually. The title also boasts a drive-through BWS, 19 EGMs and the liquor licence, in a two-storey building recently upgraded by the tenant.
When bidding stalled at $14,800,000, Tsekos offered an audacious additional ten dollars, reluctantly accepted by the auctioneer and securing the property.
With net rental income just over $900k, the final price meant a tight 6.1 per cent yield on the regional hotel investment.
“Throughout the marketing campaign we received 30 enquiries and 11 contract requests,” Burgess Rawson’s Keiran Bourke relayed to PubTIC.
“Since the CPI rate is so low now, investors are seeking fixed percentage rental increases more than ever. That plus the long lease to Woolworths’ ALH were the main drivers for enquiry.”
