Local pubs go under the hammer

The four biggest banks are understood to have about $7 billion exposed to the sector, and the listed real estate trusts also have large portfolios.

Hotel owners say that while poker machines provide solid cash flow, the changes to smoking laws and consumer spending habits have reduced their income.

A decade ago, when the Carr government limited poker machines in NSW to city pubs, first-time investors rushed to the sector.

But they paid too much and were inexperienced at running hotels. These landlords now face difficulties.

As a result, and on a brighter note, signs of life are emerging in the Sydney pub market as traditional hoteliers return to capitalise on attractive yields and lower interest rates.

Recently Strattons Hotel in the city centre sold for about $8 million. The deal followed the sale of the Ritz Hotel in Hurstville last month to the Redmond family for about $40 million. And ALE Property has added to its portfolio by buying the Narrabeen Sands Hotel for $8.95 million.

The next test of the market will be the receivership sale of the Woolpack Hotel in Redfern on behalf of the receivers and managers Taylor Woodings.

Joel Fisher, the hotels director for CBRE, will manage the sale of the popular inner-city pub, previously owned by the brothers Simon and Dominic Usalj.

Mr Fisher said the Chalmers Street hotel was one of only a few Sydney pubs to have been publicly offered to the market this financial year in what had been a lean period for the sector.

"As with most markets in 2008, sales activity in the national pub market did not achieve the levels of the corresponding three years," Mr Fisher said.

However, he said there were signs that money was beginning to flow back into the sector. Mr Fisher attributed this to an easing of interest rate pressures and continuing improvements in hotel revenues following the introduction of smoking bans in 2007.

He said the pub sector traditionally performed well in tough economic times.

The market had been dominated by institutional and corporate buyers, but this had changed. As profits and borrowing costs fell traditional hotel buyers had returned to the market. "We're noticing a shift away from institutional buyers to existing hoteliers who have sat on the sidelines in recent years because of the bullish market conditions."

Mr Fisher said the Woolpack Hotel was in an area that was about to benefit from urban redevelopment by the Redfern-Waterloo Authority.

The hotel is just 150 metres from the South Sydney Rabbitohs' spiritual home and official training base, Redfern Oval, which recently underwent a $19 million upgrade.

Source: http://business.smh.com.au/business/local-pubs-go-under-the-hammer-20090327-9e5s.html