By Andrew Starke

Sydney hoteliers Iris Hotel Group and Patrick Gallagher have re-aligned their hotel portfolios this week in deals worth a combined $31.85 million.

In the larger of the two transactions, fourth generation publican Patrick Gallagher has sold Iris PJ Gallagher’s at Parramatta for $19.35 million in one of the bigger NSW pub sales seen in the past two years.

In turn, Iris has sold Gallagher the 27-year leasehold of the Criterion Hotel in the Sydney CBD for $12.5 million.

CBRE Hotels director Joel Fisher and CBRE Hotels manager Daniel Dragicevich negotiated the two-pronged deal which kicks off what is expected to be a much stronger year for the NSW and Sydney pub market as established publicans search for new opportunities.

“While much of the recent commentary around the pub sector has centred on receivership and distressed asset sales, this deal highlights the confidence established publicans have in quality assets in the Sydney hotel market,” Fisher said.

The Iris Hotel Group has a portfolio of high profile Sydney pubs including the Clovelly Hotel and the Hunters Hill Hotel. Their Parramatta acquisition was negotiated on a yield of between 10.5 -11.5 percent.

Patrick Gallagher bought the western Sydney hotel, then known as the General Bourke, in 1998 before transforming it under his PJ’s brand.

The deal marks a move by Iris back into the hotel market following some time on the sidelines after the 2007 sale of their 12 strong hotel portfolio to the then Hedley Leisure Group (now Redcape Property Fund) and NLG for more than $330 million.

“The purchase also shows the strategy that has worked well for Iris, with this asset having similar attributes to their other current hotels, which are all landmark hotels on large holdings with big cash flows as opposed to their initial philosophy of focusing on gaming based hotels,” Fisher said.

As part of the Parramatta deal, Iris has sold Gallagher the leasehold of the Criterion Hotel on Park Street in the Sydney CBD.

“This represents the highest price paid for a NSW leasehold hotel in well over two years and again shows the premium being paid for quality hotels with a balanced mix of trade, good trading history and a superior location,” Dragicevich said.

The deal marks the latest foray by Gallagher into the Sydney CBD following his purchase last year of the leasehold of the St Patrick’s Tavern in King Street for just under $3 million from Melbourne’s Aussie Leisure Group (ALG).

His portfolio also includes the Union Hotel, North Sydney and the PJ Gallagher’s Drummoyne.

The deals follow a number of recent high profile Sydney pub transactions – with more in the wings according to Fisher, who said CBRE Hotels had a further $30 million in deals agreed and due to exchange in the coming weeks.

He said the sales were the precursor to a much more active 2011 as the market continued to recover.

Another recent transaction, negotiated in early January, saw a local private investor snap up the waterfront Port Macquarie Hotel and Town Green Inn from the Redcape Property Fund for $15.8 million, subject to a lease in place to NLG.

The Shout Team

The leading online news service for Australia's beer, wine, spirits and hospitality industries.

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