Pubs are hot property and wineries remain highly sought-after by buyers. But what are the options for everyday investors?


A record $2.2 billion worth of pubs changed hands in 2022.

The ASX is home to some big hitters: Australia's largest pub operator Endeavour Group (EDV), the largest pub landlord Charter Hall Group (CHC) and the biggest wine producer Treasury Wine Estates (TWE).

But there are only a few pure-play wine or pub stocks among the listed options for investors thirsty to add hotels or wineries to their ASX portfolios.

Pubs are hot property

A record $2.2 billion worth of pubs changed hands in 2022, according to HTL Property (formerly called Ray White Hotels). That's up from $2 billion in freehold going concern sales, where both the property and business are acquired, in 2021.

"We know this year will be another strong year, there's no doubt," HTL managing director Andrew Jolliffe says.

A local family bought Sydney's iconic The Oaks Hotel in Neutral Bay in February for close to its $175 million asking price. While the exact price has not been confirmed, it would beat the record set by last year's near-$160 million sale of western Sydney’s Crossroads Hotel to a private hotel group.

Prominent hotel owners like Justin Hemmes and the Laundy family, experienced publicans, individual private investors, families, institutional investors and real estate investment trusts (REITs) have been buying pubs.

Ray White Commercial head of research Vanessa Rader says food and gaming are driving forces for the pubs market.

She says pubs now have a higher quality food offering and appeal to a range of patrons, while those with accommodation have also benefited from increased tourism.

Rader says gaming is a big revenue source for pubs and the value of the limited number of gaming machine entitlements has grown, although there are also regulatory issues.

"There is still certainly demand for pubs. And while we are still happy to go out and eat out and frequent the local pub, they will continue to be a very lucrative investment opportunity for a lot of people."

Jolliffe says there are several drivers behind the interest in pubs, including the sites' development potential.

Pubs are typically situated on high streets or corners which restricts the number of available sites, there are high barriers to entry including regulatory approvals and the business model is cash flow positive.

"There's very few things that can replicate the experience of going to a traditional hotel… the food, beverages, retail, accommodation, gaming, entertainment - all of that is in one spot," Jolliffe adds.

How to invest in pubs on the ASX

Property fund manager Charter Hall became Australia's largest pub landlord in 2021 when its Charter Hall Long WALE REIT (CLW) and superannuation fund Hostplus acquired ALE Property Group in a $1.6 billion deal.

Charter Hall Long WALE REIT and Hostplus own more than 140 hotels and taverns after adding ALE's 78 pubs including iconic venues Melbourne's Young & Jackson and Sydney's Crows Nest Hotel.

Young and Jackson in Melbourne

The Young and Jackson in Melbourne is one of 140 pubs owned by Charter Hall Long WALE REIT. Picture: Getty

The pubs are part of the REIT's diversified real estate portfolio totalling 550 properties.

Morningstar equity analyst Alex Prineas says the REIT has a high-quality portfolio with long leases to strong tenants - the biggest being Endeavour and government agencies - that are unlikely to miss a rent payment and are responsible for most costs.

Prineas says about half its income is linked to inflation, which helps offset rising debt costs faced by property trusts.

Morningstar views Charter Hall Long WALE REIT as undervalued.

"We think it's a pretty attractive REIT," Prineas says.

"It's a very uncertain outlook at the moment in the economy, whereas this REIT's earnings are fairly secure because of those strong leases to strong tenants."

Hotel Property Investments (HPI), which Morningstar views as fairly valued, is the only pure-play pub portfolio on the ASX.

Most of its 59 properties are in Queensland and leased to Queensland Venue Company, a joint venture between Coles and Australian Venue Co.

Morningstar senior equity analyst Adrian Atkins says a key attraction of Hotel Property is its favourable lease terms that provide predictable, above-inflation rental income from long leases to QVC.

"Since annual rents are not linked to earnings, investors do not generally benefit from the upside of stronger pub operating performance and face the downside risk of the joint venture not renewing leases on poorly performing pubs," Atkins says.

"Although this risk has been substantially alleviated due to the renewal of most leases for an extended 10- to 15-year period."

Morningstar director of equity research Johannes Faul says Endeavour provides meaningful exposure for investors wanting pubs in their portfolio.

"We expect Endeavour's hotels segment to generate about a third of group earnings in fiscal 2023," Faul says.

"Endeavour is mainly a pubs operator, but also owns freehold pub properties."
Endeavour's ALH Group operates 349 hotels and is the biggest poker machine operator with more than 12,500 gaming machines.

Endeavour is also Australia's largest liquor retailer with 1696 BWS and Dan Murphy's stores. Faul expects the liquor chains will generate over 80% of Endeavour's sales and two-thirds of earnings in fiscal 2023.

Faul says Endeavour shares currently trade close to Morningstar's fair value.
"We assess the risks around Endeavour's electronic gaming machines business and the growth outlook are appropriately priced in by the market."

ASX options for investors keen on wineries

Treasury Wine Estates, whose brands include Penfolds, is one of the world's largest wine companies.

Treasury owns 17 wineries, mainly in Australia and the US, and owns and leases 11,300 hectares of vineyards in key winemaking regions.


Treasury Wines owns 17 wineries in Australia and the US. Picture: Getty

Morningstar equity analyst Angus Hewitt says Treasury's strategic shift to focus on high-end wines and increased geographic diversification should benefit both its long-term revenue growth and profitability.

He says while global wine consumption has proven sluggish, high-priced wines have bucked this trend.

Hewitt says Treasury provides investors with exposure to the global wine market, but adds that the shares screen as expensive at the current prices.

"While we're positive on the premiumisation trend, we don't believe Treasury's volume share gains and positive mix shift support strong enough brand assets to offset industry fragmentation, a proliferation of branded offerings, limited customer switching costs, and potential for changing consumer tastes.

"As such, we think the company will continue to combat competitive pricing and promotional activity globally."

Hewitt says the wine industry is highly competitive, and volatile annual demand and persistent industry oversupply limit Treasury's ability to maintain economic profits over the long term.

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Hewitt also notes Treasury has effectively repositioned its business after China imposed tariffs on Australian wine, limiting the potential upside should the restrictions ease.

Smaller wine stock Australian Vintage Limited (AVG), whose brands include McGuigan Wines and Tempus Two, has also been pursuing a premiumisation strategy while growing its market share in no-and-low wines.

It is one of Australia's largest vineyard owners with more than 2700 hectares while its Buronga Hill winery is the third largest in Australia.

Wineries and vineyards attract a range of owners: lifestyle buyers, winemaking families, major wine industry participants, institutional investors and private equity investors.

While investment activity has not reached the same heights as the pubs sector, Jolliffe says interest in wineries is at its highest point in probably a decade.

Jolliffe says rising tourism to wine regions during the pandemic increased investor attention on the asset class, noting many wineries now offer overnight stays and cellar door experiences.

Faul says Endeavour offers only immaterial exposure to wineries for investors, noting the handful of wineries it owns represent a very small part of the group's valuation.

Exclusive brands, including wine from Endeavour's own wineries, account for more than 10% of the group's liquor sales, he adds.