The strong buyer interest prompted ALE this month to announce a broader sales program to capitalise on the private investor demand for smaller value properties with long term leases to high quality tenants.
The initial round of sales will involve:
Davey’s Hotel at Frankston and the Royal Hotel at Sunbury both in Victoria;
The Sunnybank Hotel and Albion Hotel, both in Brisbane, and the Caloundra CBX Hotel on Queensland’s Sunshine Coast and;
The Ramsgate Hotel at Henley Beach and the Enfield Hotel in Clearview, both in South Australia.
Expected prices for the individual hotels range from $5m to $10m.
The hotels will offered for sale individually at an auction to be staged at Melbourne’s Crown Casino on October 7. The auction will be steered by Joel Fisher, Scott Callow and Craig Harley, of CBRE Hotels, in conjunction with Raoul Holderhead, Billy Holderhead and Pat Kelly of Burgess Rawson.
Mr Fisher said the overwhelming investor response to the initial ALE portfolio sale had set a strong precedent for the upcoming auctions.
All seven properties are being sold with 19 years remaining on leases to ALH, with options to renew for a further four, 10-year terms. The leases are Triple Net (excluding QLD land tax) and include yearly CPI rent adjustments and a collared market rent review in 2018, offering the incoming owner a secure and unusually long term revenue stream.
“In the current low interest rate environment we are fielding strong investor demand for well positioned commercial properties with strong investment fundamentals. In this instance, investors are being given the opportunity to buy well established, highly successful hotels which provide long term, CPI indexed rental cash flows backed by Australia’s largest hotel operator,” Mr Fisher continued.
Mr Raoul Holderhead of Burgess Rawson added, “as a further bonus, the ALH business is 75% owned by Woolworths, Australia’s leading retailer. ALH operate more than 280 licensed venues and over 450 retail liquor outlets across Australia. The business has – and continues to be – one of Woolworths’ stronger performing divisions.”
Mr Harley, of CBRE Hotels Queensland, said Brisbane’s Sunnybank Hotel was expected to attract particularly strong investor interest. The landmark property in Brisbane’s southern suburbs occupies a prime 2.7 hectare site – one of the largest hotel sites in South East Queensland.
The Sunnybank site includes both a Dan Murphy’s and BWS liquor store and is regarded as one of the strongest performing gaming pubs in Queensland. The rental income is $814,952 per annum, before land tax.
Also up for sale is Brisbane’s high profile Albion Hotel and popular tourist watering hotel the Caloundra Hotel on Queensland’s Sunshine Coast. The Albion provides net annual income of $447,345 while the Caloundra Hotel offers an annual income of $430,459.
“The long term leases and the blue chip tenancy covenants set these assets apart from other recent hotel offerings, with the opportunity to purchase a long term cash flow linked annually to CPI, backed by one of Australia’s largest companies is not often seen in the hotel market,” Mr Harley said.
“All three are long established and successful businesses, which are certain to attract significant buyer interest from passive investors. There is a flight to quality in the current market and we are fielding strong demand for assets in this price range of $5m – $10m which offer highly secure income streams and quality lease covenants.”
Another prime ALE offering is the Ramsgate Hotel at Henley Beach in South Australia. Billy Holderhead, of Burgess Rawson, said the iconic, Victorian-era pub was situated on a prominent corner site which offered water and Henley Pier views.
Mr Holderhead said the hotel’s gaming room was presently undergoing a $2.5 million extension and refurbishment to capitalise on the property’s strong trading performance. The Ramsgate Hotel offers a net annual income of $386,451 while the other South Australian pub in the auction line-up – the Enfield Hotel at Clearview – provides a net annual income of $268,809.
Two Melbourne pubs – the Davey’s Hotel and the Royal Hotel – will also go under the hammer.. The Davey’s Hotel provides net annual income of $268,193, while the Royal offers a net annual income of $307,576.
“The Davey’s Hotel is located in the bayside suburb of Frankston and is positioned close to the foreshore, on a large site. The Royal Hotel is located in Sunbury, to the north west of Melbourne, which is within a major growth corridor,” CBRE Hotels Senior Director, Victoria, Scott Callow said.
“Combined with the ALH lease covenant, this should provide a significant drawcard for prospective purchasers.”
** All the QLD rentals quoted are before land tax is deducted.