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News release

Sydney

Potts Point commercial landmark to be sold

Sugarmills Hotel for sale


The Keystone Group owned Sugarmills Hotel and Office Complex 33-37 Darlinghurst Road, Potts Point is to be offered for sale on a long-term leaseback basis by JLL Hotels & Hospitality Group and Colliers International by Expressions of Interest, closing Wednesday 1 April 2015.

It follows a string of passive investment hotels recently sold on a sale and leaseback basis by national operators looking to release equity tied up in freehold assets to pursue the abundance of new operating opportunities emerging in new precincts around the nations capitals.

John Musca, National Director – Pub Investment Sales, Hotels & Hospitality Group, suggested, "When operators in any asset class seek to liberate dormant capital for brand expansion nationally, in a low interest rate extremely receptive trading environment, investors seeking annuity incomes will ultimately benefit."

JLL jointly sold the Golden Sheaf Hotel, Double Bay for circa AU$43 million on a 6.5% yield the largest single sale and leaseback pub transaction ever recorded, highlighting, "Investor's recognition of the tenant's pedigree and the capital flight to yield in this unique and increasingly sought after retail asset class." He continued, "The sale of Strattons Hotel in the city on a 5% yield recently also supports this."

The Sugarmills complex includes a four-level operating hotel including recently completed rooftop bar, hotel licence and 25 gaming machines and three levels of commercial offices in two freehold buildings. Situated on a 570sqm site it enjoys three street frontages and is adjacent to the train station.

The property will be sold with the benefit of a 20-year combined leaseback and with an FSR of 3:1 and a seven story height limit, offers significant long-term future redevelopment potential. "The long lease and exceptional property location, will certainly appeal to offshore investors seeking a quality Sydney city fringe land-banking opportunity and passive secure income." Suggested joint selling agent Steam Leung of Colliers International.

The properties are of the highest standard and over the years have had over AU$13 million of capex investment with full structural and building upgrades and replacement of essential services.

Keystone Group is a leading hospitality operator with 25 venues across the country and boasting iconic brands including The Chophouse and Jamie's Italian franchises and award-winning hotels such as Cargo Bar, Bungalow 8 and The Winery. The group is currently expanding, opening four new venues in this financial year, with a further two new venues scheduled to open in New Zealand later this year.

The hotel is expected to fetch circa AU$20 million and will follow JLL and Colliers recent sale of the Oxford Hotel Darlinghurst on a sale and leaseback basis also, for AU$12.75 million. The Heritage collection of buildings in Surry Hills, including the prominently tenanted Keystone 'Winery Bar', also recently sold for circa AU$50 million on a low 7% yield.