Investment firm Westbridge Funds Management has increased its hospitality holdings with a second collaboration with Australian Venue Co (AVC).
Earlier in 2023, Perth-based Westbridge acquired the Hampstead Hotel (and a stand alone First Choice Liquor store) in Collinswood, South Australia as the first asset in its new Total Return Fund. The venue, which occupies a 1.09 hectare plot, was purchased from Coles Group for a reported $15.1m following Westbridge’s wholesale investor capital raise of $10m.
This pub is the third that the investment company has acquired, and the second in a tenancy partnership with AVC. AVC will operate pub through its Queensland Venue Co joint venture with Coles.
As part of this co-operation, Westbridge have pledged to upgrade the Hampstead Hotel’s facilities as part of its ‘Value-add Strategy’. This obligation will include the addition of a new beer garden.
In return, AVC will commit to the property for a further 10 years, bringing the ‘weighted average lease expiry’ (WALE) of the venue to 16 years.
Damian Collins, chairman at Westbridge Funds Management, outlined why the firm had decided to expand its hospitality holdings, and collaborate with AVC.
“The Australian pub and hospitality sector is currently experiencing a transitional phase with the emergence of several dominant corporate operators.
“Australian Venue Co. (AVC) is the second largest operator of pubs, bars and venues across Australia, with over 200 hotels nationally. This brings a reliable, blue-chip income stream for the hospitality assets held by our funds.
“By establishing a solid professional relationship with AVC, we have been able to work together to develop strategies that improve outcomes for both AVC as tenants and our Westbridge investors,” Collins continued.
Simon Worth, Westbridge’s head of capital transactions, outlined the worth of pubs as investments.
“Pubs and hospitality assets can act as a hedge against inflation as they are cash-generating businesses, and steady demand means the impact of rising costs can be passed more easily to the consumer,” Worth said.
“Pubs also benefit from a diversified revenue stream that blends food and beverages, and in some cases live entertainment.
“And an ancillary bottle store can add even more depth and value to this offering.”
The company contextualised its acquisition in the wider post-pandemic pub market, pointing to the over $2bn worth of assets changing ownership in 2021.
“More often than not, pubs are located on high street or arterial road locations, which can see the underlying land represent a significant proportion of overall investment value,” Worth adds.
“Strict regulatory guidelines across all Australian states and territories also make it difficult to obtain new liquor licences which, coupled with a scarcity of sites earmarked for pubs and ‘big-box’ liquor retailing, can support tenant retention.”
Collins agrees, and believes that the partnership with AVC will give Westbridge an additional edge.
“These favourable investment fundamentals, supported by a strong national tenant like Australian Venue Co, can make for a very valuable addition to a diversified property portfolio,” the chairman concluded.
AVC declined to comment for this story.