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News release


Queensland ripe for opportunity

​Improving market conditions and renewed investor confidence in Queensland's pub investment market

Improving market conditions and renewed investor confidence are the key reasons why two of Australia's hotel operators are going to the market in 2015.

Both the pub and gaming markets are awash with opportunities as investors seek to enter the strengthening Queensland market, while astute operators see it as a good time to find out their true portfolio value. The AT Hotel Group and Drinx, with two very different hotel portfolios, are two such operators.

"Queensland is starting to show strong signs of a resurgence moving into 2015," John Musca, Director – Investment Sales, JLL Hotels & Hospitality Group, said.

"Queensland's positive outlook has been brought on by a number of factors including bank lending criteria, record low interest rates and relaxation of state gaming legislation."

Last year saw in excess of $250 million of pub sales in Queensland with the JLL Hotels & Hospitality Group responsible for more than half of the 30 transactions.

 "There was a flurry of activity towards the end of 2014 with the strength of the market being highlighted by the Independent Pub Group exiting the Queensland market with all of their seven pubs sold through us over an 18-month period," Mr Musca said.

"The current climate makes for an obvious migration for New South Wales' hotel operators to Queensland, especially those looking at increasing their scale in the market, with Queensland showing stronger value."

In New South Wales, yields for freehold going concern pubs in and around Sydney, are currently below 10% in many instances, with history showing that there is generally a 50-100 basis points relaxation between Queensland and New South Wales.

Mr Musca says that banks are lending up to 70% for freehold properties and up to 55% for leaseholds, with five year fixed interest rates at below five per cent and likely to drop even further.

As a result, for the first time Drinx will be offering The Belvedere Hotel, The Full Moon and The Grand Central for sale in Brisbane, offering considerable food and beverage scale and diversified income streams.

"The spectacular success of the new micro-brewery, The Charming Squire at South Bank, along with Jimmy's on the Mall restaurant in the CBD, demonstrates that the Brisbane market responds well to large quality food and beverage operations," Mr Musca said.

"Assets with large food and beverage divisions, alongside gaming revenues, are no longer seen as daunting propositions as operators fine tune their offerings and look to establish nationally recognized and acclaimed venues." "The waterfront Belevedere Hotel is a Brisbane icon and with 8042sqm, is considered Brisbane's equivalent to The Newport Arms Hotel or the Beach Hotel, Byron Bay".

JLL's Hotels & Hospitality Group are marketing these properties through an expression of interest campaign.

The gaming market, too, has improved considerably with Queensland gaming legislation changes, including the ability to increase gaming machines up from 40 to 45.

"Gaming authority pricing has risen sharply in the South-East Queensland sector from a low of $67,152 in November 2012 to a high of $131,341 in November 2014 per authority showing the demand from the market is back," Paul Fraser, Senior Vice President, JLL's Hotels & Hospitality Group, said.

"The gaming authority pricing in Queensland is often used as a barometer as to how the sector is travelling. Confidence in this revenue stream has slowly been restored after years of uncertainty."

Mr Fraser believes that for many buying groups the pendulum has swung back to assess assets that perform strongly in gaming given its consistency of performance and robust cash flow nature.

 "The climate is now right for purchasers to acquire in QLD before yields begin to constrict, as such the Stafford Tavern Brisbane and the Sugarlands Tavern, Bundaberg are being offered to market through JLL by the AT Hotel Group," Mr Fraser said.

"Both assets boast large gaming centric and retail operations in key large land holdings areas. The consistency of performance will be seen as extremely attractive propositions to the market looking at certainty of earnings."