What trends are you currently seeing from pub buyers?

In a tightening lending environment, you’d be forgiven assuming that the strong will be the only ones to get stronger in 2019. While competition over metropolitan remains at unprecedented levels, barriers to entry for new players will remain as long as vendors choose an “off-market” strategy. Vendors not wanting to be seen as vendors results in established players being presented opportunities without the broader market having a look in. At some point, that’s going to limit the ultimate sales price and those selling will revert to public campaigns to maximise their returns.

Have you seen a boost in enquiry from interstate and overseas players?

There’s been a noticeable spike in NSW operators looking north to the more populated areas of South-east QLD. The attraction lies in that market sustaining much higher yields – up to 20%. There’s an element of “smoke and mirrors” at play here, as these assets have to be held for a very long time to compensate for the lack of capital growth in the asset itself. I’m dealing with far fewer international enquiries than the same time 12 months ago. It’s quite obvious the difficulty in moving funds from China, in particular, has had a similar effect on the pub market as it has in the residential space.

What do you anticipate for 2019 and the next 5 years?

I can only see already strong demand in the asset class growing over the next 5 years, with the consolidation of existing portfolios to maximise efficiencies and buying power. With the medium-term threat of legislation change around Gaming now abated, operators will concentrate on extracting the most upside from their passive revenue streams, with a renewed focus on accommodation set to re-invigorate metro and rural hotels.

What noticeable transactions have you conducted in over the past 12 months?

While it’s tempting to talk about the hotels that attract the highest sales price, without a doubt, my sale of the Gunnedah Hotel late in 2018 illustrates more than any other the state of the current market. Gunnedah is a great town, enjoying population growth against the overall trend in the bush. Interest from established city operators was incredible – speaking as much about the lack of metro opportunities as it does the quality of the hotel itself. The EOI campaign turned into its own auction process which resulted in an eventual yield of 11.% - at least 4 basis points lower than market expectations, and truly reflective of the genuine interest from established city operators in quality country hotels.

Phone or email Nick Butler via the below contact details.

See also:

"Continued transactional appetite expected for the NSW pub market in 2019" - John Musca, JLL Hotels

"Pub buyers moving north into Queensland" - Power Jeffrey & Co, CBRE Hotels

Tighter yields and limited stock lead pub buyers to broaden their horizons - CBRE Hotels