Strong investor demand for Coles and ALH pubs continues

Melbourne, 14 January 2015 – A private Melbourne-based investor has outlaid $6.35 million for the Western Tavern in Mount Gambier in the latest signal of strong buyer demand for pubs leased to major national operators such as Wesfarmers Ltd subsidiary Liquorland and the Australian Leisure and Hospitality Group (ALH).

CBRE Hotels’ Joseph Du Rieu and Scott Callow negotiated the sale of the Mount Gambier hotel, on behalf of Hotel Property Investments (HPI). HPI is a publicly listed investment trust that owns a portfolio of approximately 50 properties, the majority of which are leased to Liquorland.

Mr Du Rieu said; “We received six offers for the property, with the sale price reflecting an initial yield of 7.75% based on the long term lease to Liquorland. The strong buyer interest highlights the continued pent up demand from both private investors and large corporates for freehold hotel investments with AAA covenants.”

This was evidenced, Mr Du Rieu said, by major 2014 transactions such as Charter Hall’s acquisition of 54 pubs, all of which are tenanted by ALH, a group 75% owned by Woolworths and 25% owned by renowned publican Bruce Mathieson. The Charter Hall acquisition was concluded at an initial yield of 6.8%.

The Western Tavern is located at 178 Jubilee Highway West in Mount Gambier - South Australia’s second largest city, which boasts a permanent population in excess of 25,000. Mount Gambier is located some 460 kilometres south east of Adelaide and approximately 450 kilometres west of Melbourne.

The tavern comprises 33 gaming machines, bistro dining, sports bar and drive through Liquorland bottle shop.

“The campaign attracted interest from across the nation, with inquiries from investors in most capital cities, together with locals in Mount Gambier,” Mr Du Rieu added.

The new owner will have the benefit of 4% yearly increases to the annual net income of $492,032 for the remaining 13 years of the Liqourland lease. 

CBRE’s Mr Callow said the transaction followed a flurry of freehold hotel investment sales in the closing months of 2014.

“It is evident investors continue to exhibit demand for quality hotel investments, resulting in further yield compression,” Mr Callow said.

“Continued low interest rates and the higher returns on offer for hotel investments are seen to be significant factors contributing to increased levels of buyer demand,” Mr Callow added. 

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2013 revenue).  The Company has approximately 44,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through approximately 350 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.