By Ian Neubauer
Analysts believe an increasing number of small publicans will be forced to sell as a result of overcapitalisation, mounting interest rates, short-term losses resulting from new smoking laws and a cyclic dip in the market.
McGrathNicol’s Murray Smith told The Australian Financial Review there was “more activity in the pub market in the last six to 12 months than probably in the last five years”.
Landmark White’s Adam Ellis said “the blood has started [to flow]”, while PPB’s Jack Bournelis told the newspaper “rate rises hit hoteliers who were heavily geared [and] who had also suffered from buying pubs at fairly high prices”.
The phenomenon is most pronounced in NSW, where the small footprint of many pubs has made it hard for hoteliers and leaseholders to build internal smoking areas. Most of the large hotel groups allocated funds to refurbish their pubs before smoking bans came into effect and avoided much of the short-term fallout.
The NSW casualty lists is getting longer every day. The Exchange Hotel in the inner city Sydney suburb of Balmain recently changed hands for $3 million less than the incumbent paid in 2004, while the Clovelly Hotel has been sold at a price believed to be below its valuation.
But larger players in the state have not been altogether immune. Mark Alexander-Erber’s Pubboy empire was forced into receivership this month, while publicly listed hotel conglomerate National Leisure and Gaming put the skids on 31 refurbishment projects after downgrading its pre-tax earning projections for the year by more than 30 per cent.