Justin Hemmes’ Merivale has purchased the Duke of Gloucester Hotel in Sydney’s eastern suburbs for $32 million following a discreet sales campaign.
The Randwick pub, located on a 746sq m landholding at the cross section of Frenchmans Road and Clovelly Road, was picked up from Sydney hospitality operator John Azar, who heads up Good Beer Company.
Azar purchased the two-level heritage property, affectionately known by locals as "The Dog", for $17 million in 2015.
Good Beer Company, which also owns Surry Hills pub Keg & Brew, listed for the property for sale in March last year with an asking price of $30 million.
Azar said it had been a “fantastic” hotel to own in great local community, but he said it was passing it to well-respected operators.
Hemme’s said the purchase represented a strong vote of confidence in the future of Australia’s pub industry after a torrid year and marked an optimistic step forward in hospitality’s road to recovery.
The expansive hotel has a 2am liquor licence and capacity for 30 poker machines, and currently includes three bars, two kitchens, a TAB, poker-machine room and multiple outdoor areas.
Merivale will receive the keys to prominent hotel, which dates back to the 1930s, in January 2021 with future plans for the venue yet to be announced.
It joins Coogee Pavilion, Hotel Centennial, The Royal Bondi and The Paddington in Merivale’s growing eastern suburbs pub portfolio.
The deal was negotiated by JLL’s John Musca and Ben McDonald, and attracted significant interest from rival hoteliers, unlisted investment funds, family offices and wealthy individuals.
Musca said the sale was fiercely contested and exchanged only five days after bid closure with activity across the sector quickly picking up.
“The current weight of capital, and it’s divergent private and public sources, continues to drive transaction demand not seen in over a decade, yet again illuminating the asset classes undeniable investment attributes.”
“JLL has now transacted over $253 million worth of hotels in the past two weeks alone,” Musca said.
According to the AFR’s Street Talk column, Hemmes is currently in front of the country's big banks vying for as much as $500 million to refinance and grow his pubs and restaurants empire.
Much of Merivale’s value is tied up in its properties, including sites in Sydney’s central business district and suburban pubs, although those properties are highly strategic and closely guarded.
The move to refinance comes at the end of a trying year for Merivale—and many other owners of pubs and hotels.
Plenty of venues were shut for long periods during the lockdown, and some remain closed.
The billionaire hotelier was also hit with a class action at the end of last year after allegations Merivale underpaid thousands of staff as much as $129 million over several years.
Hemmes’ portfolio of more than 70 pubs, hotels and restaurants came under scrutiny when it was revealed they paid 3,000 staff under an expired 2007 agreement that allowed them to pay workers as much as 20 per cent below the award.