John Singleton and Geoff Dixon launch sale of prized Sydney pubs

Proving they are still canny investors, long time mates and businessmen John Singleton and Geoff Dixon are selling two prized assets, the Marlborough Hotel in Sydney's inner-west Newtown and Kinselas Hotel in Darlinghurst, to take advantage of the red-hot pub market.

They plan to use the cash for other assets, if the prices stack up.

It comes as more than $500 million of pubs have changed hands in the past year, led by the Lantern Group, which is selling down its pub portfolio as it shifts its business focus.

One of the most recent was the purchase of the Five Dock hotel by former Wallaby Bill Young for $30 million through Ray White Hotels' Asia-Pacific director Andrew Jolliffe.

Level One Bar at the Marlborough Hotel, Newtown.Credit: Tanya Lake

Mr Dixon and Mr Singleton's assets are in the $300 million Australian Pub Fund, which the duo formed in 2010, together with investment banker Mark Carnegie. They had a plan to buy up to 20 under-performing pub assets in prime locations and overhaul them to increase their value.

The two pubs are being sold through Mr Jolliffe, who said that at a time when the market has been particularly active, with record prices achieved across the eastern seaboard, the two Riversdale hotel assets are expected to be aggressively pursued given their prominent commercial land holdings, and robust cash flow businesses.

Mr Dixon, the former chief executive of Qantas, confirmed the sales, saying it was the "right time" in the cycle to sell the two pubs.

APF bought the Marlborough for $12.17 million in 2012 and Kinselas for $12 million.

Kinselas at Taylor's Square is on the market.

"But we are open to offers for the others if we can realise the value," Mr Dixon told Fairfax Media.

"However, we are not liquidating, as we are also keen buyers, as always, at the right price. These pubs are big gaming pubs which are well patronised for a certain demographic."

John Singleton at the opening of the Marlborough Hotel garden bar in Newtown with Riversdale Group executive Geoff Dixon.Credit: Wolter Peeters

Mr Dixon said despite the various issues surrounding the pub sector, namely lock-out laws, pubs that offer good food and beverage and have a community feel are still very popular with investors and customers.

"The yields are very good for high-quality pubs, and while no sector is bullet proof, we certainly see hotels offering good cash flows, particularly those where investments to add value have been made," Mr Dixon said.

The Marlborough Hotel on King Street.Credit: Andrew Quilty

Market appetite

Mr Jolliffe said he has seen the market appetite and depth tested several times over the past six months both in the hugely successful Lantern Hotels' managed sell down, as well as individual examples, including the recent sale of the Colombian Hotel in Surry Hills for $18 million.

"What these recent sales have illustrated is twofold, being that A-grade freehold hotel assets are both scarce and keenly sought after, and that when properly marketed, the appetite from astute property and hospitality investors remains largely unquenched," Mr Jolliffe said.

"The Marlborough is undoubtedly an iconic Newtown hotel generating annual revenues in excess of $11 million, spread across 670 square metres with huge street frontage; and holds a commensurate position in inner west Sydney folklore, being a central meeting place for residents, university students and hospital workers from the famed Prince Alfred.

"Positioned outside Sydney's well publicised lock-out laws area, the Marlborough has enjoyed a strong trading platform over the past two years, with Jolliffe anticipating additional incremental revenue levers for a successful purchaser."

Mr Dixon said the sales do not include his private portfolio, which he says focus more on food and beverage offerings than poker machines.

Riversdale

APF grew from the Riversdale group, which was originally formed by Paddy Coughlan and Rod "Ned" Kelly, and included in the portfolio was the Bellevue, Toxteth, Peakhurst Inn, Unity Hall, the Vic at Enmore, the Marlborough, the Como in Sydney and the Bristol Arms and also the Elephant Arms, in Brisbane.

Mr Dixon said in 2013, APF's strategy would remain the same as in recent years – that was securing good assets in good positions in growth areas and regions with operational upside.

Riversdale chief executive Andrew Gibbs said now was a perfect entry point for Riversdale to refine the portfolio.

"We've watched the market closely over the past 12 months and have seen some very well prosecuted divestment strategies take place; in fact, some of which we've participated in on the buy-side of the process," Mr Gibbs said.

"Accordingly, we feel the timing is right for us to bring some properties to market in the manner proposed, and look eagerly upon the outcome of the process we've committed to implement."

Mr Jolliffe said the second hotel Riversdale is bringing to market, Kinselas, is a long-term eastern suburbs institution enjoying strong food and beverage patronage, as well as 30 gaming machines that alone contribute more than $3 million in annual revenue, placing the hotel in the top 250 in NSW.

"The confluence of the historically low interest rate cycle, ready availability of senior debt, the low Australian dollar driving inbound revenues and the strength of weekly cash receipts when collectively distilled, render the opportunity to acquire A-grade hospitality property wholly compelling," Mr Jolliffe said.