In the latest signal of strong buyer demand for pubs, a private Melbourne-based investor has outlaid $6.35 million for the
Western Tavern located at 178 Jubilee Highway West in Mount Gambier.
CBRE Hotels' Joseph Du Rieu and Scott Callow negotiated the sale of the Mount Gambier hotel, on behalf of
Hotel Property Investments, a publicly listed investment trust that owns a number of properties leased to Liquorland.
The tavern comprised of 33 gaming machines, bistro dining, sports bar and drive through Liquorland bottle shop, attracted attention from across the nation with both investors from capital cities and locals in Mount Gambier expressing their interest according to Mr Du Rieu.
When explaining the current state of the market for such businesses, Mr Du Rieu said, “We received six offers for the property, with the sale price reflecting an initial yield of 7.75 per cent based on the long term lease to Liquorland.
"The strong buyer interest highlights the continued pent up demand from both private investors and large corporates for freehold hotel investments with AAA covenants.”
Mr Du Rieu explained that such a statistic was evidenced most particularly by major 2014 transactions such as Charter Hall’s acquisition of 54 pubs, all of which are tenanted by
ALH, a group 75 per cent owned by Woolworths and 25 per cent owned by renowned publican Bruce Mathieson. The Charter Hall acquisition was concluded at an initial yield of 6.8 per cent.
CBRE’s Mr Callow said the transaction followed a flurry of freehold hotel investment sales in the closing months of 2014.
“It is evident investors continue to exhibit demand for quality hotel investments, resulting in further yield compression,” Mr Callow said.
“Continued low interest rates and the higher returns on offer for hotel investments are seen to be significant factors contributing to increased levels of buyer demand,” Mr Callow added.
Higher returns and low interests definitely seem to be the push behind such a force, with the new owner of the Western Tavern set to have the benefit of 4 per cent yearly increases to the annual net income of $492,032 for the remaining 13 years of the Liqourland lease.