One of the city's well-know watering holes, the Verandah Bar's leasehold is on the market with price expectations of about $9 million as the owners take advantage of the strong pub sector.
Current owner, Dean Haritos, who sold the Light Brigade Hotel in Sydney's eastern suburbs to the Bayfield family in 2015, said he had received a number of unsolicited inquiries for the hotel, at 60 Castlereagh Street, which prompted him to test the market.
While most pub sector sales are freehold, a lack of city sites has led investors to turn their attention to long-term leasehold concerns.
"In much the same way we were when we brought The Light Brigade Hotel to market, the unsolicited inquiry we've fielded for Verandah Hotel has been such that we felt it was appropriate to engage the industry specialists and put some process around the constant inquiry," Mr Haritos said.
Adviser to the sale, Ray White Hotels' Asia Pacific director Andrew Jolliffe, said given the strength of the business, comparative recent sales and strong future prospects for increase proximate patronage, "my expectation is that astute investors will see real value around $9 million".
The Verandah hotel operators have a 29-year lease with the building owner, DEXUS Property. It covers 1000 square metres and comprises multiple bars, a separate area dedicated to gaming and wagering, two large alfresco balconies and an upmarket restaurant. It has annual revenue of about $7 million.
Mr Jolliffe said leases with well-priced rent levels and ample tenure, such as the Verandah, can offer investors "materially superior" returns than those derived from property indexed investment; and are clearly far less capital intensive.
While a number of recent hotels sales, including the record-setting Tennyson Hotel sale by Mr Jolliffe to Merivale's Justin Hemmes, have been freehold transactions, Mr Jolliffe believes the market for well-positioned and appropriately structured Leasehold Hotel business is also very strong.
"ALH, Woolworths' prolific pub arm and the nation's largest hotelier has, by its actions, made no secret of the fact that less balance sheet-intensive investment in the hotel industry is a preferred investment criteria fit," Mr Jolliffe said.
"This is a very long lease in the middle of the CBD with considerable infrastructure investment going on at its doorstep, and with the unmistakable benefit of the ownership of the hotel and poker machine licences, it really is a unique proposition and we're confident it will be pursued both deliberately and accordingly."
