Woolworths biggest NSW hotel in terms of its poker machine turnover yesterday failed to sell at auction, illustrating the continuing softness of the market and fears over proposed changes to gambling legislation.
The Cambridge Tavern at Fairfield was among three A-grade NSW hotels leased to premium tenant Woolworths-controlled Australian Leisure & Hospitality Group which did not sell yesterday.
The auction of the Woolloomooloo Bay, the Iron Horse Hotel at Cardiff, near Newcastle, and the Cambridge Tavern was regarded as a bell-weather of the financial health of the industry.
They had been expected to attract good prices, as pubs tenanted by Woolworths and Coles’ pub joint-ventures have withstood market falls better than the rest.
The Woolloomooloo and the Iron Horse were passed in after failing to reach their reserves and the Cambridge was withdrawn before the auction.
Buyers are wary of paying top dollar for pubs ahead of proposed changes from the Productivity Commission report into gambling which could see gambling revenues plummet.
However the agents expect them to be sold within coming days.
All of the hotels are owned by the privately owned Melbourne company Australian Leisure and Gaming - a consortium made up of John Ashley, Proko Athanasakos, and Mazen Tabet.
The Cambridge is ranked fourth in the state in terms of the amount of cash generated by its poker machines, according to a list published by the NSW government.
Australian Leisure and Gaming had been hoping to attract a yield of 6.5 per cent on the sale of the hotels, but the rejected bids reflected yields of around 7 per cent to 7.5 per cent.
They had been hoping to follow in the footsteps of rival hotel group ALE which sold hotels in Pymble and Kirribilli on yields of 6.3 per cent and 6.5 per cent.
Agent Billy Holderhead from Burgess Rawson said he was in negotiations to sell the Cambridge Tavern for more than $20 million.
But the consortium is under pressure to sell the Cambridge Tavern for at least $29 million to recover what it outlaid in buying the hotel in April 2008.
The consortium is under pressure from its banks as it also took a $14 million hit on the sale of the Hurstville Ritz in February last year.
The Iron Horse was passed in at $9.7 million after two parties bid at the auction.
Mr Holderhead said he expected the hotel would sell by the end of the week for about $9.8 million.
The Woolloomoooloo Hotel was passed in at $15.9 million. Negotiations are continuing with an investor from Adelaide and one from NSW.
Pub prices are under pressure as banks are loathe to lend more than 50 per cent of the value of a hotel.
vanda.carson@smh.com.au
