Allawah Hotel joins Sydney pub sale rush
A private equity group has swooped on the Allawah Hotel in Sydney’s south, in a sign that the city’s pub boom remains in full swing as banks continue lending to the sector despite tightening up in other areas.
The unnamed group snapped up the Allawah Hotel, which sits on a 1274sqm corner site next to the Allawah train station, in a deal worth about $30 million.
The pub was sold by parties associated with JDA Hotels, which had owned the property since 2007. JDA has kept a small ownership stake in the pub and will manage it for the buying entity.
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The pub sector has been buoyed by a series of portfolio sales and continued buying by experienced publicans and the families that hold sway across the industry.
Just last month Sydney bar king Justin Hemmes bought the northern beaches watering hole The Collaroy in a play worth about $21 million and investment bank Moelis finalised its purchase of the $677 million Redcape Hotel Group.
Ray White Group Asia Pacific Director of Hotels Andrew Jolliffe has handled multiple large format hotels sales this year and the latest property to be sold was a very strong A-grade gaming hotel sale.
He says the deal involved a hard asset changing hands, a “significant” equity refresh event and the implementation of a management agreement.
JDA Hotels founder John Feros says the private equity style deal structure is something his group has done in the past and will likely look to participate in again in the future.
When considering the cyclically low cost of funding, we can see sound argument for continued strength
“We had owned the Allawah Hotel for over a decade and decided the time was right to recalibrate the capital stack,” Feros says.
“While not a traditional exit event for the hotel space, we were confident we could find a deal structure that works,” he says, adding he will work with the new investor group to reposition the property and add value.
The Allawah Hotel is ranked 140 in the state’s latest top 200 gaming rankings, with other major gaming pubs selling this year including the Coolibah Hotel (ranked 64th) for $40 million. The Tennyson Hotel, which went to Hemmes’ Merivale group for $37.05 million, is now ranked 59th in NSW.
Jolliffe handled the sale of John Singleton’s Kinselas, Peakhurst, Toxteth and Marlborough hotels in Sydney over the last six months in deals totalling about $100 million. He is now selling the Vic on the Park hotel in Marrickville for the ex-Qantas chief executive Geoff Dixon and private equity impresario Mark Carnegie.
The Allawah Hotel sale took the total number of A-grade freehold hotels sold in Sydney in the past 18 months to 25, and Jolliffe is confident of further market strength given the underlying fundamentals for the sector.
“When considering the cyclically low cost of funding, we can see sound argument for continued strength,” Jolliffe says, noting more sales will be struck this year.
This article originally appeared on www.theaustralian.com.au/property.