The hotly-contested pub market has a new sale on the go - the Terrey Hills Tavern, with price expectations of more than $40 million.
The landmark Northern Beaches hotel has been placed on the market by Feros Group, led by Sydney publicans Nick and Chris Feros, who recently opened the Prince Hotel in Kirrawee and count the Rocksia and Taren Point hotels in their pub portfolio.
The group also is scheduled to open the newly-developed Highfields hotel in Caringbah before Christmas and has signalled intentions to redeploy capital to this new venture as the rationale behind sale plans for the Terrey Hills Tavern.
The sale has been timed to capitalise on the bullish Sydney freehold pub market, with about $650 million in top-tier pubs changing hands over the past 18 months in 26 separate transactions.
CBRE Hotels' Daniel Dragicevich and Sam Handy have been appointed to sell the tavern, which follows the recent record divestment of the Beach Hotel in Byron Bay for $70 million. It was bought by the Melbourne-based Impact Investment Group, which has more than $730 million in existing assets and under construction and aims to shift capital towards investments that generate social and environmental value.
Terrey Hills Tavern sits on 15,870 square metres and the agents say it produces annual revenues exceeding $11.6 million. It is widely considered to be the jewel in the crown of the Feros Group portfolio.
CBRE national director Dan Dragicevich said the tavern ranks alongside other Northern Beaches favourites such as the Newport Arms in terms of the scalable nature of the business and sheer size of the operations.
"The hotel was also well positioned to capitalise on the nearby Ingleside land release and master-planned mixed-use development, which would add an additional 3400 new homes and 13,600 new residents to the immediate area," Mr Dragicevich said.
CBRE Hotels' NSW director Mr Handy added that the Terrey Hills Tavern was virtually "unopposed within its catchment area and was a genuine community focal point for tens of thousands of residents in the surrounding suburbs".
"We expect the sale campaign will generate interest from a broad spectrum of buyers. This will range from hoteliers attracted by the secure $11.6 million annual cash flow, through to land bankers and developers, with the site's large landholding offering future development and site amalgamation options," Mr Handy said.
Strong demand
The sales come as NSW and Victoria are leading the pack in the Australian pubs market, according to CBRE's latest pub trends research for the first half of 2017.
The Terrey Hills Tavern campaign continues another strong year for CBRE Hotels, who have sold more than $300 million in assets in 20 transactions in NSW alone.
The first half of CBRE's 2017 Australia Pub Trends report confirms that the NSW pubs market is outperforming all other property sectors in the state, with some sizeable transactions occurring. Victoria also has performed well, with high asset turnover as investors maintain their strong interest in leasehold and freehold assets.
CBRE research manager Ben Martin-Henry said turnover on the eastern seaboard is subdued in comparison to the extremely high levels of activity seen last year, due to owners' unwillingness to part with prized assets. However, "NSW and Victoria have performed strongly and demand is still extremely evident," Mr Martin-Henry said.
In Victoria, demand for quality assets is outweighing supply.
According to CBRE, freehold pubs are in particularly high demand, with metro opportunities being quickly snapped up to take advantage of Melbourne's thriving hospitality scene. A lower supply of traditional metro freehold pubs has resulted in yields compressing to 4-6 per cent, with regional pubs remaining at 8-10 per cent.
Recent metro sales include the Marine Hotel in Brighton on a tight 3 per cent yield for $15.8 million and the Beach Hotel in Albert Park on a 4.2 per cent yield for $18 million.
In other sales, John Musca, the national director, hotels and hospitality group, at JLL Australia, sold the freehold of the Clovelly Hotel in Sydney for about $34 million to a local investor.
The leasehold of the pub was bought last year by restauranteur Matt Moran and Bruce Solomon, through Ray White's Asia Pacific director Andrew Jolliffe.
Mr Musca said the recent sale of the Palisade Hotel to a local investor for $30.5 million, at a 5 per cent yield, was evidence of the high demand for pubs.
"The sale has capped a virtual Millers Point renaissance spurred by the state government's extensive property sell-down in what was largely an under-recognised, yet fast-becoming world-class, harbour-front area," Mr Musca said.
Mr Jolliffe also has sold the Patonga Beach Hotel, which has an expansive water frontage and has long been a favourite destination for Central Coast locals and day hoppers from across the harbour at Sydney's Palm Beach. The identity of the buyer is unknown.
Mr Jolliffe also is selling the Bondi Icebergs freehold on behalf of John Singleton.
