Low interest rates and signs of better times ahead have seen some of the country’s best known premium pubs and hotels change hands this year. Transactions have been notable not only due to many hotels’ high profiles but also for ticking the same boxes - being long-held, well-presented properties situated in front-row locations.
The latest trade saw two of Sydney’s iconic watering holes – Kinselas and the Courthouse Hotel – sold to private equity firm Moelis Australia’s in a $67 million deal. The sale included the two retail sites in between. Both long-standing A-grade properties are renowned in the city as anchors of the lively Taylor Square nightlife precinct. It brought to 37 the number of establishments traded within the 36 pandemic-riddled weeks between March to November according to analytical data from investment house HTL Property – Hotels Tourism Leisure. The trades equated to some $300 million, a figure HTL Property analysts said augured well for the sector as it indicated the willingness of financiers to match that of buyers and sellers despite the challenging year.
Big players
Although overall activity has not matched 2019 the number and scale of top-tier transactions and plans for capital enhancements has made industry observers sit up and take notice.
“Most notable is the fact that some particularly experienced actors within the asset class are the ones prosecuting the most definitive acquisition strategies,” said HTL Property director Andrew Joliffe. “Most recent capital deployments are almost exclusively linked to leading groups such as Redcape, Merivale and Iris Capital.”
Encouraging too was that transaction volumes, while sitting at 70 per cent of those at the same time last year, picked up pace considerably in the last two months, Mr Joliffe added. “Portfolios are being realigned just as urgently as they are being reimagined,” he said. “It really is a landscape where the fast are outperforming the slow as distinct from simply the big consuming the small.
“The asset class remains heavily pursued by astute sources of both capital and debt and represents a safe investment environment in a geographically shrinking region for A-grade opportunities.”
Venues revitalised
Such an opportunity was nabbed by Moelis Australia Hotel Management (MAHM), the investment manager and hotel operator platform owned by Moelis Australia, when it picked up the Taylor Square properties, paying $45 million for Kinselas earlier this month and $22 million for the Courthouse in November. MAHM is now developing a masterplan enhancing its Taylor Square holding by revitalising the entertainment offering while adding value to the area and community. Significant amounts of capital will see the venues overhauled either separately or together to create “a hospitality precinct right on Taylor Square”.
Taylor Square has an ideal location in the middle of Oxford Street’s retail strip and at a major junction of routes into chic inner city enclave Surry Hills, Sydney’s Eastern Suburbs and CBD. But like the Oxford Street retail strip it suffered when customers fled to glittering new shopping malls and entertainment hotspots, and is now ripe for rejuvenation.
“The widely held view is that Oxford Street is in for a renaissance in the years to come as astute investment houses and developers seek a foothold in what will be the city’s only 24-hour precinct following the reshaping of the lockout laws,” said HTL Property National Pubs Director Dan Dragicevich.
Kinselas last traded three years ago when it was sold by Riversdale Hotel Holdings to Kospetas Property Group for about $23 million in 2017. The Courthouse Hotel however had been held for 30 years, last selling for $1.905 million in 1990. The holding will be managed by MAHM under the new stand-alone unlisted MA Taylor Square Fund.
Supersized transactions
Moelis Australia is one of the biggest players in the hotel game with around $4.7 billion of assets under management, controlling the ASX-listed Redcape Hotel Group portfolio along with the Grand Hotel in Sydney’s Rockdale. It kicked off the year’s string of high-profile trades when it picked up Byron Bay’s iconic Beach Hotel for a heady $104 million. As with the Taylor Square site, Moelis is pouring capital investment into the enormous hotel, a focal point for community and tourists alike due to its spaciousness, facilities and idyllic location directly opposite Byron’s Main Beach.
At the same time Moelis was cleaning up in Taylor Square, the fast-growing hospitality group Iris Capital made a significant strike in Sydney’s south. In one of 2020’s biggest transactions, it paid $45 million for The Narwee Hotel, and added it to the estimated $1 billion Iris Capital portfolio. The hotel as with many traded this year was another sizeable, well-known property, and sits on 3370sqm opposite a train station. It was sold by the Ryan family who had owned and operated the pub for 34 years.
The Narwee Hotel acquisition occurred within weeks of the ink drying on Iris Capital’s $180 million purchase of Australia’s ibis hotels from AccorInvest in another fittingly supersized hotel transaction.
Sales show no signs of abating either with billionaire pub baron Arthur Laundy announcing yesterday (Tues Dec 15) the purchase of western Sydney pub the Bidwill Hotel for a cool $35 million. He and one of his business partners Fraser Short, with whom he controls The Watsons Bay Hotel, also bought well-known eatery and rural property The Farm just outside of Byron Bay in September for $16 million.