LAKES HOTEL GARDENERS ROAD ROSEBERY
Our family company had been operating hotels in New South Wales on brewery leases. In 1982 Random Breadth Testing was introduced in New South Wales and the Neville Wran Premier of New South Wales told the hotel industry that they would be allowed to have poker machines in pubs to offset the revenue lost by the introduction of RBT.
The prices of hotels fell as RBT cut into revenues, and we saw this as an opportunity to buy a tired but solid hotel at a reasonable yield.
However commercial interest rates were very high, and credit was tight. Our bankers suggested that because it was the first time we were buying a freehold property that the associated risk meant that we could only have funds at 20% p.a. interest.
We managed to secure a line of credit from a non banking institution at 15% p.a (around 2.5% over the home loan rate) to purchase the Lakes Hotel.
The hotel had a public bar, lounge bar, restaurant, bistro and beer garden. It had a large room for functions and accommodation on the upper floor. Having the owners exercise hands on management at every control point was change that the staff took a little time to get used to.
In difficult trading conditions we improved the turnover significantly. We introduced a TAB and poker machines, upgraded the bistro and re-introduced the social and golf clubs for patrons.
By 1987 credit was freed up and buyers were prepared to pay multiples based on low yields. We sold all our projects in the early part of 1987 and kept our funds in cash