Froth back in city pub market as tycoons swoop on venues

The investment bank run Redcape is again selling as big pub owners step up to buy more assets.

The Vauxhall Inn was bought by Sydney-based Orion Hotel Group.

Sydney’s pub market is showing more signs of recovery, with the Redcape Hotel Group selling two pubs worth $73m in total to high profile buyers.

The group’s sales of the Vauxhall Inn at Granville and the Wattle Grove Hotel in Wattle Grove, both in Sydney, shows that it has bounced back from a move to freeze redemptions last year.

It has since sold a series of pubs across Sydney and paid out investors, and buyers are now snapping up pubs in the belief that they will benefit from the industry’s recovery.

Big name publicans including Arthur Laundy and the Ryan family are back buying and momentum is building in the sector with more experienced players tipped to expand as they expect a lift in operating performance once interest rates ease.

The off-market deals were brokered by JLL’s John Musca, Ben McDonald and Kate MacDonald across both properties and HTL Property’s Andrew Jolliffe and Dan Dragicevich on the Wattle Grove Hotel.

The Vauxhall Inn was bought by Sydney-based Orion Hotel Group, headed up by Michael Wiggins, Nick Savas and Myles Docker.

The Wattle Grove Hotel was bought by the Melbourne-based Francis Group, headed up by second generation hotelier, Tom Francis. The group earlier bought the Kings Head Tavern in South Hurstville, also from Redcape, adding to their stable of seven Victorian venues.

“As a family, we are excited to further continue our expansion into the Sydney hotel market with the acquisition of Wattle Grove Hotel. This marks a significant milestone for us as we continue to grow beyond our home state,” Mr Francis said.

Redcape managing director Chris Unger said the deals continued the group’s execution of its capital management strategy and rebalancing its portfolio.

Redcape told investors the sale proceeds would go into high quality assets that complement its portfolio and enhance the earnings yield of the fund. “The manager is currently progressing due diligence to acquire approximately $120 million in assets which are higher yielding and have attractive risk return characteristics,” the group told investors.

They will help in diversifying the fund’s portfolio by geography and earnings mix. Redcape has also kicked off negotiations with the fund’s lenders for the extension of its $350m debt tranche due to expire in December 2025.

Redcape said its trading performance was strong in the June quarter with like-for-like venue earnings up 7 per cent on the prior year with the performance continuing into the current quarter, and it has forecast a lift in earnings.

The pub sales are expected to help Redcape speed up the payment of outstanding redemptions. It said the pubs were sold at a blended yield of around 7 per cent, which is in line with current book values.