Harvest Hotels acquires two Adelaide pubs after $50m raise
Harvest Hotels has made its first foray outside of regional NSW, snapping up two pubs in suburban Adelaide as part of a $250m push into the South Australian capital.
After raising $50m from investors last month, the fund manager has acquired The Brahma Lodge Hotel in Adelaide’s north and The Aussie Inn in the southern suburbs.
The Brahma Lodge Hotel purchase from the Independent Pub Group was brokered by TJ Board & Sons’ Terry Board, while The Aussie Inn acquisition from the Hackham Community Sports and Social Club was handled by Mr Board and JLL’s John Musca.
Established by Sydney-based publicans Chris Cornforth and Fraser Haughton in 2014, Harvest Hotels operates a $230m portfolio of regional assets across NSW.
It recently launched a third fund dedicated to large format pubs in Adelaide’s outer suburbs, with plans for $250m of acquisitions over the next three-to-five years.
While family groups still control a significant share of South Australia’s pub market, Mr Cornforth said institutional investors were circling given the lower pricing when compared to the eastern states.
“We’ve seen institutional capital go harder at pubs in Sydney, Brisbane and Melbourne as well, and we think in Adelaide that a similar theme is going to play out,” he said.
“There’s a lot of bigger groups going into the market and we still see some good value in some really big pubs in good quality areas that are growing, hence why we’re going in there.”
Recent changes to the state’s gaming legislation, including the introduction of note-accepting poker machines, and fewer Covid-19 disruptions are also behind the renewed interest in South Australian pubs.
KKR-backed Australian Venue Co. recently acquired the Saturno Group’s eight venues and four bottle shops in Adelaide, Victoria’s Black Rhino Group has picked up 11 pubs since its first South Australian acquisition last year, and fund manager Duxton Pubs has continued its buying spree since 2020, with close to 20 suburban and regional assets.
Mr Cornforth said there was strong interest from high net worth and other investors in its portfolio, with Harvest Hotels targeting a cash yield of 8 per cent on its Adelaide fund, and total returns of 17 per cent.
“It’s high net worths, a few family offices, basically people that want to have an investment in something that they can understand, that are fairly simple businesses that you can touch and feel, and you can go to them – you can see them and you can see what you’re putting money into,” he said.
“It’s been great, given the macro environment, that people are still willing to put their hand in their pocket and have a crack at this new market.”
With The Brahma Lodge Hotel coming with 12,157sq m of land, and The Aussie slightly larger at 13,270sq m, Mr Cornforth said there was also the potential for development of additional accommodation at both sites.
Harvest Hotels operates pubs in Tamworth, Dubbo, Albury, Wagga Wagga and the Central Coast, and just last week set a record for a regional non-coastal pub, splashing out $51m on the Windsor Castle Hotel in Maitland.
While the venues have been hit hard by the pandemic, Mr Cornforth said trade continued to improve.
“I think the start of the year was really tough, January and February we found very difficult and it was effectively lockdown,” he said.
“Since that time trade has certainly bounced back, we’re getting really good consistent revenues across the group, and we’re seeing good growth in food and beverage as well, which we’re surprised by.”
Harvest Hotels will settle on its two Adelaide acquisitions, including the freehold interests in both properties, in the coming months.