Pub buyers return to the bar

CBRE Hotels director Joel Fisher said historically low interest rates and attractive investment yields were rekindling buyer interest in the pub sector after a lacklustre period last year, in which investment activity was limited both locally and nationally.

The increased buyer activity has been reflected in deals such as the $3.2 million sale this week of the Woolpack Hotel in Redfern and the recent $14.75 million sale of the BrewHouse Marayong.

Mr Fisher said CBRE Hotels had another $50 million in pub sales under agreement.

The sale of Woolpack as a going concern represented a yield of about 11.25 per cent. The BrewHouse Marayong was also sold as a going concern, by the Colosimo family, for a yield of about 11.75 per cent.

"In the current economic climate, investors perceive the hotel industry to be a defensive sector," Mr Fisher said.

"As interest rate pressures ease and pub revenues continue to improve [in the aftermath of hotel] smoking bans across the country, money is starting to flow back into the pub sector, which has traditionally performed well in adverse economic climates."

The Woolpack Hotel was sold on behalf of the receiver manager, Quentin Olde, from Taylor Woodings. The popular Redfern hotel was previously owned by brothers Simon and Dominic Usalj.

"The strong level of interest shown in the Woolpack is a positive sign for the pub industry, which has had a pretty tough run in recent months," Mr Olde said.

"Clearly there will be more sales of hotels by receivers in coming months as banks are forced to deal with the high leverage in the sector," Mr Olde said, adding that the Woolpack sale showed buyers are willing to take similar yields to private sales when dealing with a receiver.

The Chalmers Street property was sold to interests associated with a private hotel investment company, RevPar Pty Ltd.

Source: http://business.smh.com.au/business/pub-buyers-return-to-the-bar-20090522-bibb.html