Coles has sold Adelaide’s historic Hamstead Hotel and six neighbouring shops, one standalone, leased to First Choice Liquor, to fund manager Westbridge, which will seed a trust with it.
The Collinswood asset is collecting $15.1 million – a net passing yield of 5.6 per cent.
As part of the deal, the pub operator, Queensland Venue Co – a partnership between Australian Venue Co and Coles – will undertake some capital works, including adding a beer garden.
The tenant has also exercised a 10 year renewal option beyond its initial 2029 term.
Combined with the bottle shop, the asset’s Weighted Average Lease Expiry is 16 years.
Collinswood is five kilometres north of Adelaide.
Last February, Coles sold a supermarket anchored shopping centre in Victor Harbour, 80km south of the CBD, to local businessman Andrew Gwinnett, for $33.5m, reflecting a 4.12pc return.
New Westbridge fund
The Collinswood asset is earmarked for the Westbridge Total Return Fund, which targets income-generating assets with value-add potential.
The trust will invest in all sectors, nationally, aiming to establish a portfolio worth c$100m, according to Westbridge head of Commercial Funds, Alex Lambert.
Assets – which he expects will each be priced between $7-$20m – could also be recycled to buy others during what is expected to be a four to five year term.
The fund is targeting a 10-11pc internal rate of return, he added.
Distributions should circle 4-6pc, paid monthly, according to the executive.
Hampstead Hotel, shops
On 1.1 hectares at 143 North East Road, on the north west corner of Hampstead, the c1885 Hampstead Hotel includes a bar, bistro and gaming room with 39 electronic gambling machines.
The holding also contains five vacant shops – which QVC will lease to extend the hotel and develop the beer garden.
It is the fund managers third pub acquisition; the group recently acquired Mandurah’s Cobbler’s Tavern, for its MPF Diversified Fund No 2 (story continues below).
The Hamstead Hotel deal is also Westbridge’s second tenancy collaboration with AVC.
“The Australian pub and hospitality sector is currently experiencing a transitional phase with the emergence of several dominant operators,” Westbridge chairman, Damian Collins, said.
“Australian Venue Co is the second largest operator of pubs, bars and venues across Australia, with over 200 hotels nationally,” he added.
“This brings a reliable blue chip income stream for the hospitality assets held by our funds,” according to the executive.
“By establishing a solid professional relationship with AVC, we have been able to work together to develop strategies that improve outcomes for both AVC as tenants and our Westbridge investors”.
Pub revenues resilient: Westbridge
Westbridge head of Capital Transactions, Simon Worth, said while hospitality venues rely on discretionary spending, pub revenues have historically proved to be resilient – even during times of economic uncertainty.
“Pubs and hospitality assets can act as a hedge against inflation as they are cash generating businesses, and steady demand means the impact of rising costs can be passed more easily to the consumer,” he added.
“Pubs also benefit from a diversified revenue stream that blends food and beverage and in some cases live entertainment,” according to the executive.
“And an ancillary bottle store can add even more depth and value to this offering.
“Post COVID, pubs have attracted considerable investor interest, with a record $2 billion-plus of venues changing hands in 2021 as institutional and private investors are attracted to favourable fundamentals.
“More often than not, pubs are located on ‘High Street’ or arterial road locations, which can see the underlying land represent a significant proportion of the overall investment value.
“Strict regulatory guidelines across all Australian states and territories also make it difficult to obtain new liquor licenses which, coupled with a scarcity of sites earmarked for pubs and ‘big box’ liquor retailing, can support tenant retention”.
Burgess Rawson’s Raoul Holderhead, Beau Coulter and Billy Holderhead with Knight Frank’s Oliver Totani represented Coles.
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