Charter Hall Group (ASX:CHC) has acquired the freehold of AVC-leased venue Harlow in Cremorne, Melbourne.
The historic inner-city property comprises a 1,100sqm building, with a ground floor bar and dining space, a large split-level beer garden, rooftop bar, and basement bar. It is on a 485sqm corner site with more than 45 metres of frontage to Church Street and Lesney Street.
The hugely popular pub is leased to Australian Venue Co. (AVC) until 2039 with two 10-year options. It’s currently returning $516,785 per annum net with 3 per cent annual increases and a market review at option.
The freehold sale was handled by Fitzroys’ Paul Burns and Chris James.
“This was one of Melbourne’s premier pub offerings in 2024, recognised by private players through to major institutional investors as really good real estate,” Burns said.
The sale price of $9m reflected a 5.75 per cent yield.
“It’s incredibly rare for an asset like this to be offered, particularly at this pricing,” stated Burns.
“The investment fundamentals are extremely strong – featuring a mostly net lease with a 25-year term and long options to one of Australia’s best hotel operators.
“We expect the yield will tighten again as the economy stabilises, while the asset in the meantime offers guaranteed income from a blue-chip tenant with fixed increases. This simply represented good real estate in a booming location.”
The acquisition represents another investment from Charter Hall into the precinct, following on from their nearby development of Australia Post’s new headquarters. Harlow’s corner site is situated in the heart of Cremorne’s commercial district, which has a high concentration of international headquarters, co-working spaces and creative spaces. Major commercial occupiers in and around the area include Carsales, Seek, Disney, Tesla, NDIS, MYOB, Adidas, Australia Post, Red Energy, Reece, 7-Eleven, Uber, Mattel, REA Group and 2XU.
“The commercial, lifestyle and location fundamentals of the area clearly encourage strong market participation across a range of sectors, from office developments through to pub investments,” suggested Burns.
Charter Hall’s HPI bid and chair retirement
The announcement of this acquisition comes a week after Charter Hall and Hostplus announced a joint bid to takeover HPI, at a cash offer bid of $3.65 per security. Swiftly after the public announcement of the bid, the HPI Board recommended to securityholders to reject the bid, calling it “opportunistic”. Charter Hall and Hostplus swiftly reiterated the bid. Charter Hall and Hostplus currently retain an 18.56 per cent interest in HPI.
HPI’s portfolio consists of the freeholds of 58 hotels across the country, with the majority in Queensland.
In other news, David Clarke, Chair of the Charter Hall board for the last decade, intends to retire from the board at the conclusion of the AGM on 20 November. Stephen Conry AM, a current non-executive director of Charter Hall, will be appointed as chair immediately following Clarke’s retirement.
Clarke has chaired the board through significant growth throughout his tenure, with funds under management growing from $11.5bn in FY14 to over $80bn currently. Over that time, post-tax earnings per security have grown from 25 cents per security to approximately 79 cents per security.
“I am proud of the growth and success of the Charter Hall business during my time as Chair and have every confidence that under Stephen’s leadership, the Board and Executive Team will continue to create value and generate superior returns for Charter Hall’s securityholders,” commented Clarke.