Buyers circle as North Melbourne’s Castle Hotel listed for auction

​Melbourne, 12 February 2015 – North Melbourne’s Castle Hotel, formerly the Edinburgh Castle Hotel, has been listed for sale following a flurry of pub sales at the tail end of 2014.

CBRE Hotels’ Scott Callow and Joseph Du Rieu have been appointed to handle the sale by a local private investor who has owned the property for in excess of 15 years. The sale price is expected to exceed $3 million when the hotel goes to auction in March.

Mr Du Rieu said the listing followed the highly successful auction sale of Melbourne’s Flying Duck Hotel in Prahran, which was sold for $4,375,000 after attracting in excess of 50 enquires from local and offshore owner operators and developers.

Mr Callow and Mr Du Rieu handled the marketing campaign for the Flying Duck in conjunction with Cropley Commercial.  The property was sold with vacant possession to the high profile Zig Inge Group who also own and operate the Flinders Hotel in the popular Mornington Peninsula tourism region.

Mr Callow said five active bidders had pursued the Flying Duck property at a hotly contested auction, during which more than 45 bids were lodged.

“With most buyers indicating that they saw interest in the mid-high $3 million range due to the current nature of the building and the restrictive zoning of the site, we were blown away by the aggressive interest from the market and the strong result achieved,” Mr Callow noted.

Mr Du Rieu said the strong result highlighted the burgeoning demand for inner city hotel investment opportunities in Melbourne.

This is expected to underpin strong buyer interest in the auction of The Castle Hotel, which occupies a strategic corner allotment of approximately 475sqm, with three street frontages to Courtney Street, Wreckyn Street and Hotham Place.  The hotel comprises a modern public bar, bistro dining and lounge bar to the ground floor with the first floor housing a function room together with six hostel accommodation rooms.

The Castle Hotel is situated within the flexible Mixed Use Zone under the Melbourne City Council Planning Scheme. It is located within 300 metres of the Royal Melbourne Hospital and the Melbourne University precincts. 

“The Castle Hotel will be the first true test of the market for city fringe pubs in 2015,” Mr Callow said.

“Early indications are that investor and developer demand for prime corner properties such as The Castle Hotel will continue to strengthen in the coming months given the current accessibility to finance and the limited opportunities in the market.”

Mr Du Rieu said this would be underpinned by the strong results achieved in late 2014 on assets such as the Flying Duck and The Mentone Hotel - one of the last remaining non-gaming waterfront hotels in the Melbourne metropolitan area.

Another recent sale was that of the All Nations Hotel in Richmond for $2.3 million. Mr Du Rieu said all three deals highlighted the market demand for prime hotel and hospitality assets with potential for conversion in use or future trading upside.

The changing dynamic in the Melbourne CBD and city fringe has not been emulated in the nation’s most populous city, Sydney, where the market is not subject to the same level of saturation of smaller food and beverage hotels.

CBRE Hotels’ Daniel Dragicevich recently handled the sale of the Grand Hotel in Bondi Junction in Sydney’s eastern suburbs, with the purchaser being the Iris Hotel Group. Iris acquired the property with a long term view of operating the business and developing the surplus land adjacent to the hotel. This is a rare example of developers entering the pubs market in Sydney, where stringent development restrictions are placed on most CBD and city fringe sites particularly in relation to height limits and heritage constraints.

Mr Dragicevich said many city fringe pubs in Sydney maintained a highest and best use as a trading hotel business underpinned by gaming machines in most cases.

“Sydney has not seen the same quantity of food and beverage pubs as Melbourne, and those that are underperforming are typically highly sought after by experienced publicans seeking to reinvigorate the business.”

In Melbourne, Mr Du Rieu said the next 12 months was likely to be characterised by further competition between owner operator publicans and savvy local and offshore developers seeking to secure high profile assets.

“Following the aforementioned recent sales there are a number of owners currently considering their options in the current strong market.  The market for city fringe properties, in particular hotels, continues to exhibit an environment characterised by pent up demand with assets in the sub five million dollar range being highly sought after,” Mr Du Rieu added.

The public auction for The Castle Hotel will be held on-site at 12:30pm on Friday the 20th of March 2015.