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News release


A boom year for NSW pubs

The NSW pub market has returned to its boom days with more than $650 million of transactions completed in the 2014 calendar year

The New South Wales pub market has returned to its boom days with more than $650 million of transactions being completed in the 2014 calendar year. 

At the forefront of those sales has been the JLL Hotels & Hospitality Group who have been involved in 27 transactions resulting in $342 million worth of NSW pub assets changing hands across Australia in 2014.

The JLL Hotels & Hospitality Group’s outstanding performance resulted in them attaining in excess of 50% of the market share for all NSW pub transactions in 2014. 

“Pubs are trading very strongly,” John Musca, Director – Investment Sales, JLL Hotels & Hospitality Group, said. “The pub market in NSW is experiencing a high level cash flow, complimented by low interest rates, combined with a big difference between the cash rate and the cost of debt, making the buying and selling of pub assets very attractive.”

“The capital markets are awash with money, there is more liquidity in the market and there has been relative legislative calmness around the country.”

Mr Musca states that NSW has led the way for pub sales in Australia with the eastern suburbs of Sydney being a popular choice for transactions. Notable sales in 2014 included the Bondi Hotel for $43 million and the Golden Sheaf Hotel in Double Bay for $41 million, while the Cock and Bull Hotel in Bondi Junction sold for $25 million.

The Golden Sheaf was sold on the basis of a long-term, triple net lease-back with fixed annual rent growth reflecting a circa of 6.5% yield.

“We have a mixture of people keen to buy and sell pubs in Australia with New South Wales proving to be the most active market,” Mr Musca said. “Investors in the capital markets want a foothold in the pub market, some family businesses want to downsize to free up some cash, while other private investors are looking to expand their portfolio.”

“The market has changed remarkably in the past 12 months with the big transformation being that the top end of the market where industry players are now active due to confidence in the financial sector and limited opportunities to invest in other aggregate models.”

Mr Musca said there has been a steep learning curve in the pub business since 2004. Starting from 2008 a number of big pub operators have exited the market both voluntary and involuntary with new buyers keen to be involved.  

“It is clear that there is now a better understanding of how the pub market works in Australia and the same mistakes aren’t being made,” Mr Musca said. “There has typically been a healthy demand for pub assets.”

Mr Musca said that 2015 should see similar conditions for pub transactional activity though he believed that yield compression in some states will lead to higher prices.

“I think in the NSW towns of Orange, Wagga Wagga and Tamworth for example we could see yield compression and also in the Sydney fringe pub market around Wollongong and Gosford.”

The NSW Government is also expected to announce in mid-2015 changes to the gaming tax, which could affect pub revenues.