Regarding The Oaks and other big-ticket hotel offerings, Musca says these properties and businesses have benefited from decades of planning, licensing, gaming and capacity approvals in premier locations that would be almost impossible to replicate as new developments.
“Fundamentally the very best hotels in the premier locations are simply going to enjoy perpetual, unimpeded earnings growth without competition.”
$175m would set a record
Stuart Laundy, son of billionaire pub owner and Rich Lister Arthur Laundy, confirmed his family would be among those looking closely at The Oaks as a potential acquisition opportunity.
He said he couldn’t comment on whether it was worth $175 million as he had “no idea” yet of its turnover or other performance figures but said, “if someone paid $175 million tomorrow, it would not surprise me”.
“Pubs are a safe option. People have always enjoyed a drink and had a punt, it’s not a bad business to be in. Even during the Great Depression, pubs were still pouring beers,” he told AFR Weekend.
The Oaks is best known for its beer garden.
Whether The Oaks is worth as much as selling agent JLL is quoting will be determined by the market – should it fetch $175 million it would set a land rate record across both residential and commercial property on the Lower North Shore.
Generating about $23 million in annual revenue, The Oaks comes with multiple bars, including Taffy’s Sports Bar, the Bar & Grill restaurant, a gaming room with 30 poker machines, extensive first floor function spaces and high-end retail bottle shop. There’s also the potential for a five-storey development.
The Crossroads Hotel sold with 30 electronic gaming machines that bring in over $300,000 a week, a restaurant serving over 4000 meals a week and a large accommodation component across a 1.28-hectare site, six times as big as The Oaks.
“Assets such as Crossroads Hotel and Strathfield Hotel are frankly inimitable, and have separately enjoyed robust earnings platforms for decades,” said HTL Property’s Andrew Jolliffe, who brokered the record sale of both properties.
That does not mean the sector is immune to a crash, as occurred during the global financial crisis, when a mountain of debt brought down big pub giants like National Leisure and Gaming and the Hedley Group.
However, this time around owners are far less leveraged and good operators are generating healthy operating margins exceeding 20 per cent.
“When compared to other periods, loan-to-values are actually at an industry low point, with the average sitting below 50 per cent. Accordingly, the capitalization of Australian pubs has rarely been more balanced,” says Jolliffe.