‘Strong interest’ in remote Broken Hill Pub

A renovated gastro pub commanding a prominent corner position in the heart of Broken Hill is attracting strong interest from buyers, though its remote location may turn some off, analysts say.

The grand Broken Hill Pub, locally known as the BHP, occupies a vast 1,827sqm landholding on the intersection of Argent and Oxide Streets and enjoyed a recent multi-million-dollar renovation.

It’s for sale via expressions of interest closing on 28 July at 4pm unless sold prior.

Agent Greg Jeloudev at JLL Hotels and Hospitality Group said he’s “excited by the level of enquiry” so early in the campaign, with “strong interest” coming primarily from private operators and syndicates located in NSW, Victoria and South Australia.

The BHP’s new owner has the option of expanding the pub’s dining and function facilities and adding accommodation options.
Picture: realcommercial.com.au/for-sale

He said the renovation, completed in 2021, will allow the new owner to hit the ground running.

“The venue provides immediate cashflow. It’s also positioned in the heart of the retail strip of Broken Hill, providing excellent exposure and immediate foot traffic.”

The pub offers public bars, an expansive beer garden and first floor function areas, and boasts a weekly trade of more than $61,000 as well as a 24-hour hotelier’s licence.

Mr Jeloudev said there’s also an opportunity to add further value. The expansive wraparound balcony can be used as additional dining or function space, while there’s the possibility to create overnight accommodation options.

Buzz around pubs as regional hotels boost their offerings

In many ways, it couldn’t be a better time to sell a pub.

After an unexpectedly impressive recovery from Covid restrictions, pubs have seen record sales levels in 2021 and into this year, combined with record prices and attractive yields compared to other asset types.

In NSW alone, the Vineyard Hotel in Sydney’s outer suburbs sold for an eye-watering $68 million in October 2021, a record that was soon matched with the sale of Hotel Brunswick at Brunswick
Heads in December, then smashed with the $160 million acquisition of the Crossroads Hotel in Sydney’s Casula in April.

CBRE Hotels’ director Damian Kelly said pubs have graduated from a high-risk category to a more stable investment category.

“Managed well, they offer a solid cash flow business as well as a strong balance sheet growth for long-term investment opportunities,” he said.

The Broken Hill Pub’s multi-million-dollar renovation was completed in 2021. Picture: realcommercial.com.au/for-sale

Recently, investors have also had a thirsty appetite for regional pubs, which have enjoyed a renaissance thanks to regional migration and fresh opportunities to provide quality entertainment and upgraded food and beverage options.

PropTrack economist Anne Flaherty said the increase in domestic tourism has further boosted the value of regional pubs.

“In some of Australia’s smaller regional communities, the local pub often serves as a key centrepoint of the community. This is particularly the case in more remote communities where there are typically fewer venues.”

Pub market could slow

But while tourism and population movements have sparked interest in regional pubs, regional sales volumes have been propped up by families who have held pubs for many generations deciding to capitalise on the market, said Vanessa Rader, head of research at Ray White Commercial.

She expects the supply of regional pubs to slow down and the pub market in general to release some steam.

“We expect some moderation of yields this year as demand levels start to normalise and buyers are more considered in their purchase, particularly given the likelihood of rising interest rates.”

The Broken Hill Pub logs a weekly trade of over $61,000 and growing.
Picture: realcommercial.com.au/for-sale

Mr Kelly, meanwhile, expects the growth of pub assets “is far from over”.

“The market has taken a risk off attitude in the face of rising interest rates, however banks are always willing to fund quality operators into assets that they know can be run well and are not over-leveraged.”

A remote pub needs ‘boots on the ground’

While the increase in pub activity suggests there will be demand for the BHP, analysts suggest its remote outback location may put off some established pub owners, overseas or institutional buyers, and appeal more to domestic buyers.

Mr Kelly said that the BHP would be a difficult pub to put under management given it’s so far away.

“The BHP will probably attract an owner-operator that has committed to the area. Big pubs require big love and that would have to come from someone with boots on the ground and a willingness to live and breath it day in day out.”

It could also attract a developer seeking to create an accommodation solution, though potential cost blowouts and increased demand for labour may act as deterrents, he said.

Ms Rader said while regional areas have grown in popularity since Covid, this location hasn’t enjoyed the same population growth or tourism as other regional markets such as coastal locations.

“Prime regional areas that have either a strong population or tourism catchment attract the larger players, but more remote or rural/regional markets are typically more local or owners with expertise in the nuances of country pub operations.”

But she admits that in this market, it’s hard to predict.

“Opportunistic investors are now in the marketplace given interest rate rises looking to snag a good asset at an affordable price. In this market you don’t really know where the buyers could come from!”