AVC, Charter Hall snap up pubs as corporate dealmaking ramps up

AVC’s acquisition of 10 venues in Brisbane and the Gold Coast from privately owned Hallmark Hospitality for about $50 million is the first major deal struck by the operator under the new majority ownership of private equity firm PAG Asia Capital.

In April, AVC boss Paul Waterson said the group which turns over more than $1 billion a year could “comfortably” acquire 20 venues a year.

Industry insiders said the Hallmark deal was part of a “massive round up of assets” by AVC, which has lined up a new $900 million debt package giving it plenty of acquisition firepower.

The 10 pubs and nightclubs acquired from Hallmark comprise The Cavill Hotel and Sandbar at Surfers Paradise, The Lord Alfred Hotel near Brisbane’s Suncorp Stadium, Finn McCool’s Irish-themed pubs in Brisbane and the Gold Coast, Retro’s nightclubs in Brisbane and the Gold Coast, Leftys Music Hall in Brisbane, the Hey Chica Social Club in Brisbane and the Enigma nightclub in Fortitude Valley.

“We have admired some of these renowned establishments for some time,” Mr Waterson said.

The new acquisitions will give AVC a stronger presence in a region in which it is under-represented and grow its overall portfolio to about 230 venues. The country’s biggest pub operator, ALH, a subsidiary of ASX-listed Endeavour Group operates over 350 venues.

Alex Jordan from Deloitte and HTL Property brokered the sale of the Hallmark portfolio. HTL managing director Andrew Jolliffe said AVC was expanding their impressive in what remains a “hugely fragmented market nationally”.

In inner Melbourne, Charter Hall has snapped up trendy Harlow Bar in Richmond for $9 million from interests associated with former Hostplus director and property developer Mark Robertson.

The multi-storey hotel, which was previously called the Great Britain Hotel before being renovated, is operated by AVC and includes a split-level beer garden and basement bar.

Charter Hall CEO David Harrison called Harlow Bar a “great pub” and said it was in a location the fund manager knew well, having built Australia Post’s new headquarters nearby. Mr Harrison said Charter Hall had acquired the pub on a 6 per cent yield with a 15-year-lease locked in to AVC.

“A lot of pub assets sit around the $10 million to $15 million mark in our book, We own a lot of smaller assets,” he said.

Speaking at the Financial Review Property Summit last week, Mr Harrison talked up the fund manager’s appetite for hospitality assets saying everyone wanted to either represent Australia at the Olympics or own a pub.

But he said Charter Hall viewed pubs as just another type of convenience retail asset backed by long leases that it could “institutionalise” as it has done with neighbourhood malls, petrol stations and childcare.

“So from our perspective, we don’t want to be an operator. We want to be a freehold [pub] owner and lease the real estate to the best in each sector,” he said.

Mr Harrison also dismissed concerns about the impact cashless gaming might have on the sector, after the question was put to him by activist investor David Kingston.

“We have no concern…we’re pretty comfortable with our exposure [to pubs]. Obviously, we wouldn’t be making a bid for HPI if we weren’t,” he said.

Should Charter Hall and Hostplus succeed with their bid for HPI, they will acquire ownership of 56 pubs, hotels and taverns, the majority of them leased to Queensland Venue Company, a joint venture between Coles Group and Australian Venue Co.