Richest 250: How Arthur Laundy helped build the pub industry in NSW
Pubs may be going through changing times but veteran hotel mogul Arthur Laundy reckons they still make up ‘the fabric of Australia’.
Billionaire pub king Arthur Laundy doesn’t do things by halves.
At 81, he spent New Year’s Eve entertaining friends on his superyacht in the middle of Sydney Harbour, having snared a prime position for viewing the city’s largest display of fireworks.
Come 8pm, staff were serving half lobster thermidors, prime ribeyes laced with béarnaise sauce, and truffle chips to 23 hand-selected golfing and school buddies – many hailing from the days when Laundy was a boarder at St Joseph’s College Hunters Hill, where he earned the nickname Spike.
Don’t miss your copy of The List: Australia’s Richest 250, exclusively in The Australian on Friday, March 24 and online at rich250.com.au.
Roll forward a few weeks and Laundy negotiated one of the first big pub deals of 2023, buying his long-term partner Fraser Short out of $300m worth of pubs and restaurants in NSW.
The deal included the popular Watsons Bay Hotel in Sydney’s eastern suburbs, Northies in Cronulla south of the CBD, and the trendy The Farm in Byron Bay.
The multifaceted transaction came at a time when the introduction of cashless gaming was high on the agenda of the NSW Liberal state government, and Laundy admits that its possible introduction was his only concern when agreeing the deal to take Short out.
But the Laundy Hotels business has been shifting gears across its entire pub portfolio of 93 hotels for several years. It has been concentrating more on food and beverage offerings and specialist restaurants, such as Arturo’s fine dining at the Woolly Bay Hotel in inner Sydney and premium dining at the Log Cabin pub at Penrith in Sydney’s outer west.
The octogenarian Laundy is one of the kings of the Australian hotel scene, participating in many of the $2.2bn hotel deals negotiated last year, either buying pubs himself or backing younger players into transactions.
According to pub broker HTL, the $2.2bn negotiated in 2022 is a record sum, up from the previous high of $1.3bn in sales achieved in 2019. Yet even Laundy reckons the good times could be waning – at least for now.
“Hotels over the past five to seven years have probably increased in value without any major reason. I see that slowing up,” he tells The List at the bar of the newly refurbished Woolly Bay Hotel in waterfront Woolloomooloo Bay. “I am always enthusiastic about the future of pubs, but you will have to work it; it’s no longer a trade where you sit and watch. [These days] you have to work it progressively.”
The second-generation publican puts his money where his mouth is, and says he never stops working.
“I will keep that up. I have never considered retirement. I work seven days a week. I play golf on Wednesdays. I could work up to 10 hours a day, more likely six to eight hours a day. I start very early at 5.30am, have a swim and then go to the gym.
“Before lunch I take 40-50 calls,” adds Laundy, who turns 82 in May and has 2500 contacts on his Apple phone.
Indeed, he was taking plenty of business calls even on New Year’s Eve as the Infinity Pacific, which he has since sold, lay at anchor off Sydney’s Rose Bay.
“I have built four pubs in the past four years – or put it this way, three in the past 12 months in NSW, in Calderwood near Jamberoo on the NSW south coast; the Log Cabin in Penrith; and I opened Jordan Springs in February near Penrith,” he says.
Despite his buyout of Short’s share of five pubs and restaurants, for Laundy this year will be more about the consolidation and renovation of existing assets than more pub purchases.
He will plough up to $15m into renovating and extending the Oxford Hotel in Sydney’s Drummoyne, which he purchased for just under $42m in 2019, and he is also looking at renovating his heritage-listed hotel at Wilberforce in outer northwest Sydney.
“Pubs are absolutely overpriced at the moment because there are some looming concerns,” he says, adding that he is not looking to buy any more.
“Hotels are in my blood. I have watched fluctuations in the hotel trade. I have ridden the highs and the lows. And I still have the utmost belief that hotels are the fabric of Australia.”
There is definitely a scarcity factor for pubs – there certainly aren’t many new ones being built anymore, and the ones that have stood for decades are generally in prime locations. But for some the market is cooling, as evidenced by the Thomas family’s recent sale of The Oaks hotel in Sydney’s Neutral Bay in late February.
If the Thomas family, who owned the sprawling pub for 50 years, had achieved the asking price of $175m , it would have been the biggest price paid for a pub in Australian history. Listed for $175m in August 2022, the popular drinking hole with the maximum allowable 30 gaming machines is understood to have changed hands for closer to $120m.
Says one pub veteran in an off the record interview: “Pubs are coming off in value, they are volatile. Look at rising interest rates, there’s concerns about gaming, buyers can’t get funding, and valuers are starting to downgrade pubs. The industry is really coming off,” says the former pub owner.
But do others agree that pubs are overpriced?
Pub broker Andrew Jolliffe, managing director of HTL, certainly does not. He says transaction volumes during the start of this year are trading ahead of “any other commensurate period”.
“Sales to date have illustrated a mix of hotel types, with a trend towards on-premise revenues. [This] reflects the post-pandemic attraction for social gatherings, and manifests itself as augmented food and beverage revenues at the vast majority of businesses,” Jolliffe adds.
But veteran pub investor Chris Morris, who once had a spread of pubs stretching from Western Australia to Queensland and down to Victoria, disagrees and believes pubs are overpriced.
The Computershare co-founder and rich lister has always liked the hospitality sector, and in particular pubs. These days he has concentrated his hotel investment in Melbourne, where he has 12 pubs, having quietly sold out of his Western Australian and Queensland operations.
“Yes pubs are overpriced to buy,” Morris says. “For a return on investment there are a lot better opportunities in other sectors. Pick any business you like, even IT, you can get a better return on investment.
“But people love pubs; everyone wants to buy a pub.”
Billionaire Iris Capital chief executive Sam Arnaout, who owns 32 pubs spread across NSW, Queensland, and the Northern Territory, believes that they are being priced in line with the market.
Having said that, Arnaout – who lists his favourite pub as the Hotel Steyne in Sydney’s Manly, which he purchased from Laundy, investor Mark Carnegie and John Singleton for $65 million in 2019 – says he is not in the market to purchase more. “At this time I am consolidating and watching to see what will happen in 2023,” he says.
Like other hoteliers, Arnaout is also carefully watching the NSW government’s controversial plan to introduce cashless gaming.
“It’s very topical; we will have to see what it means,” says Arnaout, who has big stakes in both pokies in suburban pubs and casinos, having purchased Lasseters Hotel Casino in Alice Springs for $105m two years ago.
While few will talk about it on the record, publicans are concerned about the cashless gaming plan. A recent NSW Crime Commission report found that criminals were ploughing billions of dollars into pokies and has triggered calls for a cashless gambling card – a move staunchly opposed by pubs and clubs.
Pub owners in NSW say that if the Liberal-led Coalition government is re-elected it will undoubtedly knock their profits, while others reckon that an economic downturn could see banks call for widespread new valuations of pub portfolios.
Pubs have had a great run in recent years, but it might be time to pause, take a sip and then a deep breath. And then keep renovating, which will help drive their value up again.
The 2023 edition of The List – Australia’s Richest 250 is published on Friday in The Australian and online at richest250.com.au
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