Sydney based publican the Feros Group is offloading a $40 million slab of hotels at a time when hotels with gaming assets are attracting their highest prices in more than a decade.
The group will put two large-format pubs to market including the Panania Hotel and the Lone Pine Tavern, in Rooty Hill in Sydney’s west, after more than 18-months of receiving unsolicited bids for the properties on a weekly basis.
“Interest rates are sub-4 per cent and people’s capacity to acquire hotels is greater … but there’s a feeling that cash flow around pubs with gaming assets is also looking very strong at the moment too,” Ray White agent Andrew Joliffe said, who holds the listing alongside Ray White’s Joel Fisher.
“There’s so much capital [looking] for assets and there’s a serious imbalance between people who are prepared to spend and the amount of stock on the market.”
A string of pubs and hotel groups are looking to expand, either in preparation of an initial public listing or as the basis for a broader investment fund.
Pubs veteran Nelson Meers is in the midst of building a private pubs fund to be run in conjunction with investment house Moelis & Company, and is said to be one of the most active groups scouting the market for properties to add to a growing portfolio, which includes Marrickville’s Grand Hotel and Les Young’s Wiley Park Hotel in Sydney’s west.
At the same time, pub owner and operator the Redcape Hotel Group has taken pitches from a swag of investment banks regarding a potential float of the group’s operating arm during the second half of the year, valued at between $250 million and $500 million.
It most recently paid more than $30 million for the Crown Hotel in Surry Hills.
Rival pubs group Riversdale, with high-profile backers including Mark Carnegie and John Singleton, has gone quiet on suggestions of an initial public offer – which was first slated for the second half of 2014 – but the group’s acquisitive streak is continuing, agents say.
The group has hired Andrew Gibbs, the former general manager of Bruce Gordon’s Solotel group to head the expansion of the group, which Sydney’s Kinselas, Brisbane’s Foundry in Fortitude Valley and The Vic in Enmore are in a stable of 19 pubs, bars and other venues.
Sam and Rami Arnout’s pub group and residential developer Iris Capital is also back in the market looking for another site after paying more than $20 million for Bondi’s Cock and Bull hotel.
Consolidation in the sector and the maturation of groups including Redcape, Merivale and other providers is positioning the pubs sector as a particularly strong earner, even as income growth stagnates.
“Customers are getting a better offering, and these groups have figured out [how] to make the retail offering very, very strong … when you get that right, these assets become a very compelling investment,” Mr Jolliffe said.