Liquid Assets
Few asset classes have enjoyed the same growth as pubs and liquor in the past two years.
And with Australia’s leading hoteliers pouring considerable capital expenditure into their portfolios, investor appetite for hotel and liquor assets shows no sign of slowing
In first half of FY22, leading listed Australian hotelier and liquor retailer Endeavour Group reported $6.3 billion in sales, up 11.3% on the previous two years, across its portfolio of Dan Murphy’s and BWS retail stores and 342 ALH hotels. The result equates to increased performance across its retail stores of 18.4% during the same two-year period.
In June, Australia’s second largest hotelier Australian Venue Co (AVC) reported a 13-15% increase in revenue compared to pre-COVID levels across its growing stable of over 200 hotels. CEO Paul Waterson attributed to a “real desire among Australians to get back and socialise.”
“We’re seeing unprecedented demand from customers along with a strong functions and events pipeline, which indicates a very favourable outlook for the industry,” added Mr Waterson.
AVC expects to serve an extraordinary 2.13 million chicken schnitzels and parmigianas across the network in FY23. This would represent a 36.5% increase on FY22, a projection based on increasing demand and the acquisition of 45 new venues in the last 12 months.
It’s a similar trend at Coles Liquor, whose stable of brands includes Liquorland, First Choice Liquor Market and Vintage Cellars, reported $2 billion in revenue during the first half of FY22, an increase of 2.7% on the previous corresponding period. On a two-year comparable basis – which compares the latest half with the corresponding period pre-Covid, sales in liquor grew by 18.2%.
This sentiment is backed by recent figures released by the Australian Bureau of Statistics, which recorded a 21.6% increase in household spending on alcohol and tobacco in April 2022, compared to April 2021. Spending on hotels, cafes and restaurants was also up 14.3%.
Burgess Rawson’s Head of Asian Investment Sales, Zomart He, said liquor and pub freehold investments have become highly sought after by investors in tune with the value of favourable lease terms, and blue-chip national operators.
“Sophisticated investors are focused on rock solid, defensive and pandemic proof assets with quality tenants, and hotel and liquor retail assets fall right into that category,” says Zomart.
“They are generally tenanted by market leading, long-term operators on favourable net leases, and remain tightly held and highly sought after across the general market.
“It’s also an industry dominated by a small cohort of blue-chip corporate operators. When they make a long-term commitment to a tenancy, you know they have carried out considerable market research and forecasting, thus giving further confidence to investors.”
Mr He says Burgess Rawson’s dominance in Australia’s pub and liquor retail sector is unrivalled, having handled 11 of the last 16 freehold sales leased to AVC, QVC, ALH, Dan Murphy’s and First Choice Liquor Market, representing a market share of almost 70%.
“In 2021-22 Burgess Rawson achieved $191 million sales in the large format liquor and “corporate pub” sectors across Australia,” he said. “This included the sale of five Dan Murphy’s and First Choice Liquor Market freeholds with a combined value of $57 million and a blended yield of 4.08%, and 13 AVC, QVC and ALH pubs sales with a combined value of $134 million and a blended yield of 4.55%.”
Among the headline assets sold by the agency this year is the Bentley Hotel and Coles-owned First Choice Liquor store, 7.5 kilometres from the Perth CBD, which sold at auction in March to a Sydney-based Asian investor for $10,060,000 on a 4.06% yield.
Burgess Rawson National Partner, Billy Holderhead, said the Bentley Hotel is leased by AVC and Coles Group with guaranteed tenure until 2029 and two 10-year options.
“The fact we saw an 82-bid marathon with bids from overseas and every state of Australia exemplifies the popularity of this sector,” Mr Holderhead said.
On the same day, Burgess Rawson sold the historic Sarah Sands Hotel in Brunswick, six kilometres north of the Melbourne CBD, for $8,750,000 on a 4.19% yield. The 168-year-old strata-titled pub, which occupies a prime corner site, was sold to a Melbourne family.
Other sales results achieved by Burgess Rawson in the post-COVID market include an off-the-market Dan Murphy’s sale in Wangaratta, regional Victoria, which sold to a private investor for $8,100,000 on a yield of 3.68%.
In Maroubra in New South Wales, the agency also sold a First Choice Liquor Market on behalf of Coles Group for $10,155,000 on a 3.43% yield.
Research by PropTrack said 2021 was a record year for Australian pubs, with a 23% increase in buyer demand for hotel and leisure assets between 2020 and 2021.
It’s a trend that Zomart He says has continued well into 2022.
“Australia’s leading hoteliers have made their intentions to expand their portfolios very clear, on the back of strong operational performance, increased household spending and expending population centres,” he said.
“This expansion encompasses liquor stores and pubs, in both metropolitan and regional locations.”
Burgess Rawson is presenting three premium liquor assets at its next portfolio in September including Dan Murphy’s in Pakenham, Victoria, Dan Murphy’s in Rosebury, New South Wales, and the Exchange Hotel leased to Australian Venue Co. in Port Melbourne, Victoria.