By James Atkinson
Strong interest from investors in regional NSW pubs is indicative of a revival of the sector, says Andrew Jolliffe, managing director of Ray White Hotels Australia.
Jolliffe, who sold Tamworth's Locomotive Hotel last week (pictured left), told TheShout there has also been strong interest in the Tattersalls Hotel at Narrabri (pictured below) and the All Seasons Pavilion Hotel in Wagga Wagga, which are both expected to sell early in the new year.
He pointed to the recent sale of the Friendly Inn, Kangaroo Valley as further evidence of the trend.
"Not a lot of regional pubs have transacted for the last two years – full stop," he said.
"However, we are now seeing a dramatic change of fortunes and interest in this asset class, with astute purchasers chasing value in regional towns with strong underlying business dynamics and population bases."
Rather than larger 'multiple fund-style operations', Jolliffe said the buyers are mostly hoteliers with regional pub experience in nearby areas, and there has also been some enquiry from smaller, well-capitalised city-based funds looking to acquire regional assets.
He said the sector had 'bottom-bounced' following the onset of the global financial crisis, and the discounts applied to regional assets had become very attractive for investors.
While city pubs generally traded at a yield of 10 to 12 per cent, Jolliffe said their regional counterparts attract yields of 14 to 20 per cent.
"Interest rates transcend geographical boundaries, so money borrowed at market rates is the same whether applied to an acquisition at a 15 per cent yield or a 10 per cent yield," he said.
Jolliffe said Ray White will be bringing additional pubs to market in the new year in country towns such as Wagga Wagga, Orange, Bathurst, Narrabri, Grafton and Goulburn; as well as other regional centres like Tamworth and Port Macquarie.
He would not disclose the sale price of the Locomotive Hotel, but both it and the Friendly Inn are understood to have traded at about the $2 million mark.