Investors thirst for Melbourne’s much-loved pubs, but others call last drinks

Investors are thirsting for some of Melbourne’s much-loved pubs, despite a disturbing number of well-known hostelries calling last drinks because of soaring costs.

In Port Melbourne, the freehold of the 160-year-old Cornerstone Hotel at 1 Crockford Street sold for $2.75 million, on what JLL Hotels’ Will Connolly dubs a “market-defying” yield of 4.5 per cent.

The pub sold to hospitality operators for $3.8 million.Credit: Electric Sunday

North of the city, Hotel Collingwood at 376 Smith Street sold to hospitality operators for $3.8 million on an “equally aggressive” 4.63 per cent yield.

Connolly says a “renewed sense of vigour” has been evident in the market in recent weeks, with the Cornerstone Hotel receiving six compelling offers over the four-week campaign.

Hotel Collingwood was acquired by Only Hospitality Group, which also owns a string of pubs including Williamstown’s Hobsons Bay Hotel and Hawthorn’s The Beehive Hotel (which it recently acquired, and this week reopened after a heritage fitout).

Pub sales don’t happen overnight and are frequently off-market transactions.

“Regardless of where the market is at, pub sales generally are intricate – they take a while to go from offer stage to completion,” Connolly says. “Even in a hot market they won’t sell quickly.”

Still, with a slew of pubs advertised for sale, in coming months it will become evident whether investor appetite is parma-sized, or merely a kid’s nibble.

A “privately owned proudly independent proper pub,” South Melbourne’s Palace Hotel at 505 City Road has an asking price of $4.3 to 4.5 million.

The “well performing” establishment is on a 10-year lease, with the asking price implying a yield of 3.75 per cent and a land value of $7612 per square metre for the 578 sq m site.

The listing agent is Adam Caruso of Joseph Louis Realty.

Around the corner at 152-160 Clarendon Street, JLL is asking $300,000-plus for the leasehold of the 170-year-old recently refurbished Hotel South Melbourne.

Other pubs on the sales block include East Brunswick’s Quarry Hotel, the Kent Hotel in Carlton North and Oddfellows, one of the CBD’s oldest pubs, on Little Lonsdale Street.

There’s a dichotomy emerging between the clearly viable boozers and the sites destined for the wrecking ball (or what realtors refer to as “better economic uses”).

In a sobering moment for the pub sector, the Carringbush Hotel called last drinks in May after the operators claimed they would need to charge $20 a beer to survive.

The Carringbush Hotel is closing down because of rising costs.Credit: Eamonn Gallagher

Collingwood’s Bendigo Hotel closed in March, but got a reprieve this month after Mill Brewery said it would take over the venue and continue its live music tradition.

In Kensington, The Quiet Man at 165-271 Racecourse Road has been listed by agent Lemon Baxter as a potential redevelopment or a going concern, with the $175,085 per annum lease expiring in March next year.

The building was to have been demolished and a 41 apartment development built on the 842 sq m site, but the development permit has since lapsed.

Gentrified enclave

A corner development site in Fitzroy transacted this week for $11.5 million, with the site destined to become another apartment development in the “gentrified enclave”.

At 146-152 Argyle Street and 329 Napier Street, the 1071 sq m site spans three titles. Currently, a warehouse and corner residence-turned-office and is leased at $166,745 per annum with three years to run. The buyer was a local developer with an eye to residential development of the Commercial 1 zoned site.

The per-square metre price of $10,737 compares with the $11,717 sq m ($10.52 million) achieved last November for a 898 sq m development site at 1-9 Gertrude Street, which was on-sold by businessman Marc Besen in November last year amid a heritage row.

1-9 Gertrude Street, Fitzroy.

In June last year, Romano Property Group paid $5.5 million – $13,944 per sq m – for a 398 sq m plot at 235 Napier Street, where it built 14 luxury apartments.

On the vendor side, the latest transaction was handled by Alexander Robertson’s Warwick Bramich, Kristian Peatling and Vincent Ye and Cushman & Wakefield’s Oliver Hay, Anthony Kirwan and Hamish Burgess. The buyer was represented by JLL.

Bluestone revival

In Tarneit, the bluestone shell of the 150-year old Doherty’s House defies the encroachment of uniform modern housing.

The enduring edifice is set for a new lease of life with the Wyndham City Council calling for expressions of interest to transform the 1 Sapling Boulevard building into a cafe and cultural meeting point.

The bluestone shell of the 150-year old Doherty’s House in Tarneit.Credit:

Built in the 1870s, the 158 sq m Doherty’s House was badly damaged by a fire in 1969 that destroyed the second levels.

Preservation works on the shell was carried out in 2022. Once the operator is in place, the council plans to install indoor and outdoor dining spaces with a pitched roof, toilets and cool room added.

Expressions of interest are being handled by Fitzroys’ James Lockwood and Ned Murray.

Hungry for deals

Fast food restaurants continue to be snapped up by hungry local and offshore buyers.

At a portfolio auction conducted by Stonebridge Property Group, a freestanding 525 sq m Hungry Jack’s outlet at 218 High Street Bendigo sold for $3.825 million, on a yield of 4.81 per cent.

Stonebridge’s Kevin Tong said the top two of the six bidders were sourced via the firm’s Asia practice team and didn’t want to give up as they had missed out previously.

In June, the firm handled the sale of KFC’s Chapel Street Prahran outlet for $4.67 million, on a yield of 4.67 per cent.

Meanwhile, a Strathmore Red Rooster outlet offers rich pluckings to buyers with an eye to further developing the 4161 sq m site.

The 504 Pascoe Vale Road site is leased to the chicken chain with two years to run plus a five-year option, generating current rent of $188,360 per annum.

Savills Australia’s Rick Silberman, the handling agent, has fielded interest from national retailers looking to co-locate a restaurant and service station/car wash on the “substantially underutilised” site.

The firm is fielding expressions of interest to July 31, with $6 million expected.

In Preston’s jalapeno-hot High Street – aka. the world’s coolest street – the two-storey freehold premises of Bar Mexico is up for sale with an asking price of $3 million plus.

The 537 sq m site at 39 High Street is to be auctioned on August 21, with Colliers’ Ryan Milivojac, Travis Keenan and James Zhuang handling the listing.

Shaping up

Two gym operators are on the CBD treadmill after taking out leases on space from a common landlord, GPT, at separate locations.

In the under tenanted Goldsborough Village retail complex at 550 Bourke Street, Anytime Fitness has taken out a five-year deal across 700 sq m on the mezzanine level.

Meanwhile, REVL Health club has leased 400 sq m in the basement of the newly refurbished office building at 530 Collins Street.

Both deals were negotiated by A-P’s Josh Luftig, Zelman Ainsworth, and Tan Thach.

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