Fund Manager Charter Hall has acquired a historic hotel – and nine tenants – on the Gold Coast after missing out on a pub landlord takeover this month.
Built in the 1930s in the art deco style, the Cecil Hotel at 42 Nerang Street, Southport, is popular among locals and tourists. It has a restaurant and 35 gaming machines and is located on a prominent corner site with dual street frontage.
In a deal worth $14.25 million, reflecting a 6.71 per cent yield, the property was sold prior to auction by RWC Gold Coast’s Jackson Rameau with “a very short 14-day cash unconditional settlement.”
The hotel was put on the market for the third time since the COVID-19 pandemic and finally changed hands following two unsuccessful expressions-of-interest campaigns.
“Post COVID, there was less market confidence in pubs whereas now, you know, it’s probably one of the most exciting asset classes,” said Rameau.
There is renewed interest in the dynamic hospitality sector due to a growing population keen to interact in social hubs and the rise of craft beverages – from beers to low and non-alcohol drinks – and gourmet dining.
Lenders consider pubs an attractive choice with long-term growth prospects that offer steady cash flow, diverse income streams, and an ability to influence profitability and revenue by switching up the offerings.
The “delighted” former owners, both in their late 70s – a local investor and an Adelaide-based investor – held the property for 25 years but were motivated to pass it on due to “health issues and advancing age”.
The property, set on an expansive 1889 square metres of land at the intersection of Scarborough and Nerang Streets in Southport’s central business district, is anchored by the Australian Leisure and Hospitality Group (ALH) running the hotel, with a long lease tenure until 2035, with two 10-year options to extend.
In addition to ALH, a subsidiary of ASX-listed Endeavor Group originally founded by Woolworths Group, the property is home to another eight tenants. It is made up of five street-facing retail shops leased to established restaurants and cafes and three first-floor offices and is fully tenanted.
In 2000, the property underwent an extensive refurbishment to create diversified revenue streams, changing the appearance of the historic building. It is thought to be the oldest public house on the Gold Coast, and it has maintained its original name throughout all its years of operation.
In that time, the Cecil Hotel’s namesake in downtown Los Angeles has attracted interest due to the numerous violent incidents, including at least 16 sudden or unexplained deaths that have occurred in or around it.
Rameau said the property received an incredible amount of interest and was sold after 19 days on the market, with six inspections and five offers or contracts prior to the sale.
“We received 233 enquiries, and several groups re-engaged interest, having launched it for the third time online since COVID,” Rameau said.
Rameau said Charter Hall was privy to the site, having looked at it for many years. They wasted no time in carrying out a building inspection and valuation.
“Both parties’ solicitors were in talks within 32 hours of the property relaunching online and all their due diligence was complete prior to auction with competition from four other parties prior to auction at various levels,” he said.
Charter Hall said the purchase was in line with its selective collection of pub assets.
“This acquisition continues Charter Hall’s selective acquisition of pub assets leased to the dominant national operators, and deepens its well-established relationship with Australia’s leading hospitality operator and owner of ALH, Endeavour Group,” a statement read.
It comes as Charter Hall walked away empty-handed after their ‘best and final offer for a pub owner’ in recent weeks.
Together with superannuation fund Hostplus, the pair were unsuccessful in their attempt to buy pub landlord Hotel Property Investments (HPI) with an improved takeover offer at $757 million.
HPI reportedly rejected the approach despite a 5.5 per cent sweetener, saying: “The board maintains its previously stated position that there is no reason to sell the portfolio in the absence of a compelling offer.”
Southport is a well-serviced suburb of the Gold Coast, with its own growing central business district of 8600 businesses and 30,000 workers, according to the listing.
Situated opposite Australia Fair Shopping Centre, near Gold Coast Light Rail and TAFE QLD, the property also benefited from highly favourable Precinct 1 (CBD) zoning, with development opportunities. Subject to planning approval, it could be redeveloped to up to 40 levels.
It is also set to benefit from South-East Queensland’s economic boost from the 2032 Olympic and Paralympic Games.