Despite rises in the cash rate, coupled with market uncertainties, both JLL Hotels and Hospitality Group and HTL Property have recorded a strong first half of 2022.
JLL’s Senior Vice President for Investment Sales, Will Connolly, hailed the company’s success during the first half of the year.
“Off the back of the frenetic second half of 2021, which proved to be one of the firm’s most successful in terms of deal volume, 2022 is on track to eclipse this with unprecedented levels of buyer appetite being seen,” Connolly told Australian Hotelier.
Connolly said that JLL had settled or placed under contract 60 different sales for the calendar year.
“Total deal volume across the JLL Hotels & Hospitality platform totals $1.35bn.”
HTL has enjoyed similar levels of success, as Andrew Jolliffe, Director of Asia-Pacific Region, explains.
“On the six months to 30 June 2022, our specialist firm has negotiated the sale of assets which represent greater than 70 per cent of the total industry market share.”
“This result indicates a very positive period our firm and is rewarding given the strategic investment we continue to make so as to remain contextually relevant and responsive to the changing needs of our valued client base,” Jolliffe said.
During this time, HTL has facilitated 44 sales, or “better than 1.5 deals per week,” Jolliffe explained.
According to Jolliffe, the value of these deals is approximately $880m.
“Comfortingly our last three deals, which were all concluded this week, have been in NSW, QLD and the N.T. respectively, speaking to the geographically broad scale market rigidity,” Jolliffe added.
Major venues change hands
Both HTL and JLL have overseen the sales of significant venues over the last six months.
“A few that stand out for the national team notably includes the Pendle Inn Hotel, NSW, which was the first ever time taken to market,” Connolly said.
Connolly also highlighted ‘Victoria’s largest ever pub sale’ of the WestWaters Hotel in Caroline Springs, which was acquired by Oscars Hotels for $85m.
For HTL, Jolliffe said “the all-time record pub sale of the Crossroads Hotel in Casula is a clear highlight of the past six months.”
The Crossroads sold to Nelson Meers Group for $160m, an Australian record.
During this period, HTL also oversaw the sale of the Strathfield Hotel, the first time the pub had changed ownership for over a century.
Rates rises offset by long term planning
Recent hikes in interest rates by the Reserve Bank of Australia will inevitably have some effect on pub and hotel purchases, after years of historically ‘cheap money’ for operators looking to secure commercial property loans.
“We think [the rises] will certainly have an impact given the obvious increases in borrowing costs and probable shift in lending criteria and debt covenants,” Connolly said.
Nevertheless, both HTL and JLL indicated to Australian Hotelier that they are well placed to support buyers with long term ambitions.
“Wealth creation requires proactivity in all market conditions,” Jolliffe said.
“Rate movements, in whichever direction, are always cause for recalibration and introspection. What has historically always followed however, particularly for those who have enjoyed success is deliberate action, as distinct from inert behaviour.
“HTL as a company is here for the long term, and accordingly will provide advice and expert services to its client base in a financial climate.”
Similarly, JLL’s Connolly suggested that “the vast majority of active buyers in the market have medium to long term investment horizons and/or buy with a view of never (or rarely) divesting assets.”
“Those are the people, we are seeing, are still happy to pay prices at the sharp end of the yield curve in order to acquire high quality assets that ordinarily may not be available for sale,” Connolly continued.
Future trends and predictions for the next half-year
Despite these obvious market challenges, both JLL and HTL are anticipating continued demand for pubs across the next six months, and beyond.
“Metro assets are so hard to come by and demand is still materially outstripping supply; meaning investors are looking to sub-metro markets for exposure to the asset class,” Jolliffe said.
“We see this phenomenon gathering pace and the value spread between the two becoming consequently more aligned.”
Connolly also pointed to active markets for a broad range of pubs and hotels.
“At JLL we will have close to $800m of assets across the country available for sale across all ends of the market – from AAA metropolitan gaming assets to entry level country and regional hotels,” Connolly commented.
“We anticipate a very active and highly transactional second half of the year with some extremely high-quality assets coming to market.”
Finally, Jolliffe predicted that 2022 would break the record for value of hotels sold, saying: “2021 saw an industry record volume of hotels sold upon the national landscape at $2bn in consolidated sale values.”
“At the halfway mark, 2022 is tracking ahead of the all-time record year – with NSW at $1.07bn alone.”