Investment group growth stories to drive regional pub records in NSW

Broker Nick Butler has just done the biggest pub deal of the year, selling the entire MPK freehold portfolio of five regional hotels to the newly formed syndicate from the ACT, Investment Management Group (IMG) for an amount reported to be in the vicinity of $75 million.

All five properties sold for record sale prices, including the Royal Hotel in Orange which went for $24.5 million, having been purchased in 2019 for $10 million. Butler predicts that there is plenty of action still to come. 

“There are plenty of larger groups looking for New South Wales offerings,” he said, “As well as plenty of regional publicans thinking of selling their properties given the current demand.”

Butler set up Pub Brokers & Advisory just last year and brokered the deal with the Short, Laundy and Tindall families for their purchase of the Illawong Hotel at Evans Head, and reports there’s a solid pipeline of sales to be announced over the coming weeks.

He says that with impending IPOs for both the Endeavour Group, spinning out of Woolworths, and reports of the same for the KKR backed Australian Venue Co (AVC) vehicle, growth stories for both should see further acquisitions in New South Wales.

“Over the past decade, as larger pub investment funds have increased their portfolio, the compressed yields in the New South Wales metro markets have seen the bulk of their developing portfolios taking shape in Victoria and Queensland. 

"With the regional shift trend, these funds can now secure assets in larger towns with metrics they’re more comfortable with.  It’s an exciting time to be an owner of a strong regional pub,” Butler said.

AFR reported this week on the AVC CEO Paul Waterson who said that his business “is on the hunt for acquisitions in an industry where many smaller operators are ‘considering their options’ after a bruising 2020”.

Butler said demand for regional pubs was two-fold, driven by the boom in domestic regional tourism alongside the exodus from cities to regional centres such as the Central West and northern New South Wales.

The five MPK properties, led by hoteliers Nick McKechnie and Nelson Kelly,  included The Royal Hotel, Orange, The Dudley Hotel, Bathurst, The Castlereagh Hotel, Dubbo, The Federal Hotel, Wellington and The Federal Hotel, Mudgee.  The Royal Hotel in Orange had just been purchased in 2019 for $10 million.

“This is obviously an important sale and adds plenty of weight to the theory that strong regional assets deserve to be held in the same esteem as the larger metro pubs.  I could wax lyrical about with language more suited to private equity “metrics”, but this is all about buying quality hotels that will provide excellent returns in a low interest rate environment," Butler said.

IMG is fronted by Matthew Clowry as CEO and Andrew Turnbull, formerly of PWC.

According to IMG CEO, Matthew Clowry: "The past few years have seen exciting and significant growth across the Central West NSW region and we are delighted to have made this acquisition."

The MPK team are left with two leasehold hotels, including the Western Star Hotel in Dubbo which is also for sale on a re-stapled, freehold going concern basis.