Publicans on the up look beyond banks

Publicans looking to capitalise on bustling conditions and low interest rates are turning to alternative sources of finance.

The Beach Hotel at Byron Bay.

Publicans looking to capitalise on bustling conditions and low interest rates are turning to alternative sources of finance beyond the major banks.

Hoteliers are looking to grow their portfolios and overhaul their existing assets, and they want to borrow at the same time as traditional lenders are dealing with the fallout of the banking royal commission.

CBRE hotels director Paul Fraser said non-traditional funding sources had become a key market driver. “While general trading conditions are relatively free of headwinds, access to capital and regulated debt covenants are key to maintaining transactional momentum in the pub market,” Mr Fraser said.

“Current interest rates and ­potential rate cuts will also fuel ­investment activity and create significant buying opportunities for well-capitalised investors, leading to heightened operational cashflows and enhanced balance sheet performance.”

A report by CBRE showed that revenue-driving gaming rooms were increasingly becoming the focus of refurbishments.

Areas that were once disregarded or ignored in the past, like bars and restaurants, were also benefiting from additional expenditure due to attractive finance rates sitting at a fixed level over three to five years.

“Proactive publicans have viewed gaming room upgrades as a necessary spend as gaming performance has continued in an upward trajectory,” Mr Fraser said.

Cost-conscious holiday-makers choosing cheaper domestic travel over international locations combined with predicted improvements in the retail sector on the back of low interest rates is also supporting patronage.

The increase is being seen in coastal and lifestyle regions ­underpinned by tourism.

Some publicans are also buying “fixer-upper venues” they can turn around.

Greenfield hotel development projects in NSW are also gaining momentum in key growth areas.

Large recent commitments in Sydney include the Laundy Group’s Marsden Hotel & Brewhouse in Marsden Park; Iris Group’s Station House Hotel in Campsie and Momento Hospitality’s The Governor Hotel at Macquarie Park.

Further north at Byron Bay, The Beach Hotel has gone on the market for $100m. Developed by Paul Hogan and sidekick John Cornell, it is currently owned by a Melbourne-based private equity firm backed by the wealthy Liberman family and run by the van Haandel family.

Should it sell via JLL the venue will become the country’s most expensive pub property.

Well-established publicans are already active in Queensland, picking up three venues with ­repositioning opportunities in recent months.

These include the Commercial Hotel purchased by Roconcil, the Samford Valley Tavern ­acquired by The Comiskey Group and Woodford Hotel purchased by Deery Hotels.