Rich Lister Sam Arnaout caps year with mega Sydney pubs deal

On the sell side in the latest deal is one of the country’s largest pub owners and operators, Redcape Hotel Group, an unlisted investment fund managed by ASX-listed MA Financial.

Sales prices for the two pubs acquired by Mr Arnaout’s Iris Capital were not disclosed by the parties but market sources estimate they would eclipse the previous highest struck this year, the $75 million sale of Tea Gardens Hotel at Bondi Junction. At that level, the two pubs could also claim ranking among the country’s 50 most valuable pubs.

Redcape is itself a busy buyer, snapping up three Brisbane pubs just last week for $66 million.

The latest trading underscores the undiminished investor interest in pub real estate, as hospitality businesses – in the right hands – prove resilient despite the cost-of-living crunch.

Just last week, a Charter Hall-led consortium tightened its grip on Hotel Property Investment, which owns close to 60 pubs and hotels, persuading the reluctant board to support its $760 million takeover offer.

“Multi-dimensionally, and whilst Iris Capital operates on a national hospitality and development footprint; large format Sydney suburban hotels remain very attractive to our company,” Mr Arnaout said.

“Primarily because, and as evidenced by the combined 17, 000 square metres of commercial property holding, the inherent capacity for the asset class to absorb approved development upside levers is largely unparalleled.”

Mr Arnaout is 55th on the Financial Review Rich List with a $2.6 billion fortune. The former panel beater, who grew up in Western Sydney, has firmly established himself in the new guard of real estate moguls, taking over the Macquarie Street office of the late television king, Reg Grundy, at Hudson House late last year.

He not only controls an expanding portfolio of entertainment and hospitality venues, including the Canberra Casino which he bought two years ago, but has been just as active in pursuing a range of development projects, such as the luxury Oceania apartments overlooking Sydney’s Manly Beach.

The latest Sydney pubs deal was brokered by HTL Property director Andrew Jolliffe, along with colleague Dan Dragicevich. Mr Jolliffe said the business of pubs was thriving because many patrons felt more comfortable spending on a family meal or entertainment at the venue rather than on bigger ticket items such as holidays aboard.

And for investors in the pub property, the outlook is also improved by anticipation that the next move in the rate cycle will be down, in what will come as a boost to valuations and finances.

“This is significant in terms of what it says about confidence in the sector, confidence in the property market. And even more so about where we’re headed in the midterm,” Mr Jolliffe told The Australian Financial Review.

“And that’s about strength of the valuations, combined with the revenue that’s being generated and a legislative landscape where sensible discussions are taking place.”

For Redcape, the transaction caps off a busy year as it recalibrates its $1 billion portfolio of pubs, with a series of asset sales that have helped fund redemptions, along with strategic acquisitions. Managing director Chris Unger said the latest divestments would release capital to redeploy into other opportunities.

In an update to its investors last week, Redcape re-affirmed its two-year total return target of about 15 per cent annually and increased in distribution guidance to 2.5¢ for the March 2025 quarter. Its year-to-date like-for-like venue earnings were up about 11 per cent.