Pub and Hotel Yield Guidelines

Currently, Australian pub real estate offers an attractive positive yield spread which is bringing new sources of equity to the sector.


The following pub and hotel yield guidelines provide an overview based on today’s marketplace:

Lessor’s Interest Hotels

Yields for Lessor’s Interest pubs and hotels may vary dependent on, but not limited to, the following:

  • Location 
  • Asset quality 
  • Tenant covenant
  • Residual lease term (longer lease terms add to investment appeal)
  • Market demand

Yields for Lessor’s Interest hotels are typically lower than Going Concern yields due to them being a passive investment with lower risk. A Lessor’s Interest hotel is not management sensitive, however poor management by a Lessee may result in a lower Lessor’s Interest Value due to market rents being tied to profitability.

Lessee’s Interest Hotels

Yields for Lessee’s interest pubs or hotels may vary dependent on, but not limited to, the following:

  • Location
  • Asset quality
  • Residual lease term (a Lessee’s interest is tied to the residual term of the lease so a longer lease term will typically result in a lower yield)
  • Rental affordability (the higher the rent as a percentage of net profit, the higher the risk to a Lessee)
  • Competition
  • Market demand

Yields for Lessee’s Interest hotels are higher than Going Concern yields as they are higher risk and more susceptible to fluctuations in value due to their management sensitivity. Poor management will result in a reduction in value, with the underlying value typically limited to plant and equipment, and potentially gaming authorities if present.

When it comes to securing competitive finance for your pub or hotel, more than ever before, experience counts. Green Finance Group’s Director, Daniel Green, is a multi-award winning pub and hotel finance specialist with unmatched lending experience in this space. In just one consultation Daniel can show you how savings can be made, which bank or lenders will provide a better finance deal for your business and how to structure your finance to ensure your loan terms help, not inhibit, your productivity.

 


 

Find a better equipment finance deal today:

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