'Heart of a community': Laundy optimistic about pub sector

Hospitality industry stalwart Arthur Laundy says pubs are the "heart of a community" that create a space for people of all walks of life to enjoy a drink, meal and each other's company.

"We have had to be good operators as it is a very competitive sector, but once established, they can be the heart of a community," Mr Laundy says.

Once such example is his recent purchase of the popular Oxford Hotel at Sydney's Drummoyne for $42 million.

Craig Laundy with his father Arthur Laundy at the Oxford Hotel in Drummoyne.Credit: Louise Kennerley SMH

The robust business enjoys strong existing food and beverage centres with significant opportunity to amplify these revenue streams via a repositioned proposition, and the potential activation of a rooftop beer garden, with potential uninterrupted CBD, Sydney Harbour Bridge and ocean views.

"We are thrilled to be taking the keys to the Oxford. My son Craig was the local member when he was in parliament and our family have a long affiliation with the area", Mr Laundy said.

"We have seen more traditional operators buying back into pubs to create that local feel. That means offering separate spaces for food, sports bars, function areas, child friendly zones for mums who want to meet."

He said running a pub was "hard work" and the operator must know the area and get involved with the local patrons. The Laundy Family sponsors a number of sporting teams in the Drummoyne area.

Mr Laundy has used all that knowledge gained over a long and successful career in the sector and says the future of pubs can be gleaned from his new, large-scale $45 million hotel and brewery at Marsden Park in Sydney's west.

"We believe this hotel will be a destination hotel where people from all over Sydney will travel to," Mr Laundy said.

"We wanted to create a precinct in which the communities of Western Sydney can be truly proud and enjoy for generations to come. I have every confidence the local communities won't be disappointed.

"People from all over Sydney will be attracted to this precinct. It will become a vibrant, stylish and sophisticated new hospitality venue and function centre, which is a much-needed amenity in Sydney's rapidly growing western communities."

Proving how popular the pub sector has become, after the federal election there was a flurry of sales and even more have occurred in the past two weeks.

One of the most recent was by the northern NSW hotelier Brenden Lawless, who sold his Tweed River waterfront NSW trophy hotel, The Ivory Tavern, to interstate publican and industry figure Peter Hurley AO and his wife Jenny, for an undisclosed price.

Yields are certainly tightening across all markets in NSW and Queensland.

Blake Edwards

The unconditional sale was conducted by HTL Property's Brisbane-based Queensland director, Glenn Price; and NSW director Blake Edwards. The on-market, freehold hotel sale follows another Southern Gold Coast hotel sale by the boutique firm in the form of The Coolangatta Sands Hotel.

"Yields are certainly tightening across all markets in NSW and Queensland due to the liquidity and price parameters of finance currently available," Mr Edwards said.

"Consequently, purchasers are behaving more deliberately in terms of their approach to cash flow rich assets with strong underwritten property fundamentals."

JLL national director John Musca and Nick Butler recently sold the Frisco Hotel, Woolloomooloo for $10.5 million.

The hotel was sold by local Sydney owners Preskel Pty Ltd, also owners of the leasehold interest in the Bangor Hotel in Sutherland Shire, to Queensland-based private interests.

Mr Musca said the sale came on the back of a spate of metro Sydney hotel transactions, including the Commodore Hotel, Harborview Hotel, Harold Park Hotel, Cambridge Tavern and the Empire hotel, all sold by JLL over the past two months.

"We've many more off-market transactions to announce in a market showing the strongest fundamentals since 2005," Mr  Musca said.

According to HTL Property managing director Andrew Jolliffe, the pub market in both NSW and Queensland has shown robust results over the 2018/19 financial year.

With more than $1 billion changing hands across the two states, the desire to invest in these assets is at an all-time high. This has been reflected in the push into assets outside of Metropolitan Sydney; most notably in the Coastal regions of NSW.

"This move up the risk curve has highlighted a tightening in investment yield; which echoes the sentiment by many commercial investors regarding the attractiveness of these assets, based largely upon their wide spread to bond rates, particularly given the recent and likely continued interest rate cuts," Mr Jolliffe said.

"From a demand perspective there has been a sharp increase in enquiry since the federal election, and we expect this to continue throughout the next 12 months.

"The lending environment is liquid for those well-capitalised operators with proven operational experience; and clearly the rates at which capital can be currently borrowed is at an historic low.

"Based upon the weight of capital available, we forecast the Sydney Metro market to sharpen up to 50 basis points from current levels. Hence, we see 7.5 per cent as achievable for prime, Top 100 assets; as well as landmark or generational hotels.