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This was published 8 years ago

Pubs are the hot ticket in town

By Carolyn Cummins

ASX-listed Lantern Hotels Group has raised a further $56.5 million from the sale of two more pubs as it continues with its asset sale program. It has boosted the number of hotel sales to more than $500 million across Sydney in the past year.

The Ambarvale Hotel in south-western Sydney has been sold to private interests for $21.2 million, while the group also sold its Uncle Bucks Hotel in Mount Druitt for $25.3 million.

Lantern Hotels has decided to list the Five Dock Hotel in Sydney's inner west.

Lantern Hotels has decided to list the Five Dock Hotel in Sydney's inner west.

Lantern has run a series of sales including its Commodore Hotel in North Sydney as it focuses the business on its other assets.

At its annual meeting last month, Lantern was given the green light from investors to proceed with selling its remaining core Sydney hotels, ahead of a likely delisting and winding up.

Lantern's chief executive John Osborne said after the sales, the proceeds will be returned to shareholders in the form of distributions. Following this process, shareholder will vote again on whether to delist the group and wind up the business.

At the meeting, chairman Graeme Campbell said the group did not have the scale to support its corporate and listed structure and opportunities to grow with suitable acquisitions were rare and "tended to be fully priced".

CBRE Hotels' Daniel Dragicevich and Sam Handy negotiated the sale of the Ambervale on behalf of Lantern, at a 50.2 per cent premium on the June 30, 2016 book value.

Lantern is also selling its Five Dock Hotel in Sydney's inner west through Ray White Hotel's Asia Pacific director Andrew Jolliffe.

Mr Dragicevich said the two sales had been timed to capitalise on market conditions and the unprecedented undersupply of quality freehold gaming hotels in Sydney.

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"AAA gaming pubs are seldom offered to the market and, as a result, both properties attracted strong interest," Mr Dragicevich said.

"Prior to these sales, just three genuine Top 200 gaming hotels had transacted over the course of 2016 and there is expected to be very limited availability of pubs in the gaming segment in the foreseeable future."

The Ambarvale Hotel is on a 7200-square-metre site with surplus land and a flexible zoning and benefits from a large catchment area, limited competition and an excellent gaming demographic.

CBRE's Mr Handy said five sale contracts had been issued, highlighting the buoyancy at the top end of the Sydney hotel market

"Robust trading conditions, debt liquidity and the current low interest rate environment is driving strong buyer demand, however there has been an undersupply of quality investment opportunities," Mr Handy said.

"This led to keen interest in the Ambarvale Hotel, particularly from Sydney's top gaming portfolio publicans."

The Ambarvale transaction follows recent activity in the NSW hotel market, with CBRE Hotels having this year negotiated more than $250 million of NSW pub sales in 30 transactions.

Mr Jolliffe, who sold the Commodore, among other properties, for Lantern, said market appetite for blue-chip freehold hotel properties remains firm.

"We've enjoyed another year of dramatic sales activity, particularly in respect of high-quality freehold hotels, and this is also true of our colleagues at other agencies who have also seen strong performance," he said.

"Accordingly, the strength and, most importantly, depth of market rigour is reflective of both the quality of stock we have been fortunate to win engagement in order to represent, as well as the increasing imbalance between supply and demand for A-grade freehold hotel properties."

FIVE DOCK

The Five Dock Hotel, on a prominent corner position in Sydney's inner west and set across three levels, operates 30 very valuable gaming machines; with only 17 in an outdoor area.

"In terms of new business generation, there really are some patent examples within this offering, including the remodelling of the tired and commercially disadvantaged gaming room layout; the introduction of a better food and beverage offering, and the activation of latent non-revenue generating areas within the property over the upper levels" Mr Jolliffe said.

"There exists a distinct lack of proximate competition in a very strong commercial and residential corridor, and the recent capital investment by Lantern Hotels, largely in the form of gaming machine hardware, has seen a demonstrable and very positive profit injection for the business unit."

Mr Jolliffe recently sold Solotel's Albion Hotel in Parramatta for $60 million and is also selling freehold hotels The Clovelly Hotel and The Tennyson Hotel in Mascot.

JLL's national director of hotels and hospitality, John Musca, is also seeing great demand for hotels with his current sale of the Palisades in Millers Point.

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Original URL: https://www.brisbanetimes.com.au/business/companies/pubs-are-the-hot-ticket-in-town-20161111-gsnl0f.html