Australian Pub Fund, owner of the Riversdale pubs, has divested three key assets for $48 million in the dying days of 2016 – all to top operators keen to further build on the successes.
Australian Pub Fund (APF) is the $300 million vehicle owned by high-flying businessmen Geoff Dixon, John Singleton and Mark Carnegie. The venture planned to purchase a portfolio of under-performing pubs around Australia, and increase their value through capital investment and strong management.
But recognising the uber-hot market conditions of 2016, the business partners slipped news prior to Christmas that two of their best – the Marlborough and Kinselas – were on offer to a market agents cited as ‘starved’ of good stock.
The details of the sales remained undisclosed, as were the “unsolicited” offers for other pubs in the portfolio.
Just days before Christmas, the announcement came that John Feros’ JDA Hotels had purchased the Peakhurst Inn for $22.5 million, and Oscars Hotels had purchased both The Bristol Arms and Como Hotel for $19.5 and $5.6 million (respectively).
APF entered the market splashing cash into often bargain-priced properties. It bought the Peakhurst in mid-2010 from the beleaguered Landmark Leisure Group for $10.6 million, the Bristol ‘Retro’ Arms in early 2013 from Redcape for around $8 million, and the Como Hotel – one of the oldest buildings in Sydney’s Southerland Shire – for $4.6 million in March 2013.
Sale of the Peakhurst was managed through Ray White’s Asia-Pacific director, Andrew Jolliffe, who recently managed the auction sale of Feros’ Tennyson Hotel to Justin Hemmes, and stresses the current strength of the industry and key players.
“The off-market sale of the Peakhurst Inn is illustrative of an experienced hotelier buying and selling in the same market; a market that is still unable to satisfy the buy-side demand for quality freehold hospitality businesses in gateway east coast cities.
“Fundamentally, purchasers in this market are better funded, better informed and better served by operational experience and competency, and these key factors underwrite our considered view that the prevailing market strength, and depth, will continue well beyond 2017.”
Simultaneously, sales of the Sydney CBD Bristol Arms and star of the Shire Como Hotel, were managed by JLL national director John Musca, who similarly lauded the attributes of Oscars’ breadth of operations.
“The assets demonstrated very different attributes, with Como offering a range of operating or medium-term removal and redevelopment options, and Bristol representing an exceptional piece of CBD real estate with extraordinary value-add and development opportunities.”
Musca, who recently finalised transaction of Chris Feros’ (nephew to John) Lone Pine Hotel to Andrew Lazarus’ Bondi Asset Management (BAM), says 2016 was the biggest transactional year for hotels since 2006 – albeit at a far more attractive cost of finance.
“Capital continues to find its way to the sector where a 400-500 basis point spread still exists between sustainable earnings and the cost of debt – an attractive proposition for not just experienced operators, but increasingly syndicators as well.”
Dixon, who makes no secret he is in the business of business, and while he builds his own portfolio of pubs remains unattached to them, was suitably pleased with the recent results.
“We are delighted with the prices we received. We were not actively marketing these three pubs for sale, but the prices offered for all three pubs were at cap rates below eight per cent, and at these prices we decided the time was right to sell.
“As I have said previously, we are open to offers on all our venues … ultimately they are all for sale at the right price.”
Meanwhile, the sale program of Newtown’s Marlborough Hotel, and Darlinghurst’s Kinselas, is due to begin in earnest in late January through Ray White’s Jolliffe.