Need help to get our property sold

Hi all,
I'm looking for some advice as to what we should do regarding the sale of our Hotel.
We have been on the market for over 4 years now & have had little interest and I'd love to get some ideas from you as to why, or perhaps what we can do to generate interest. Our agents solution is - drop the price. We've already done this with still no interest.

Here's some background:
It is a pub in a one pub small country town with a residence attached.
The building is over 100 years old and in reasonable condition, however, is showing it's age.
It's on 3 acres and 2 separate titles, one title is a vacant block
We purchased it in 2006 - freehold and business
We are trying to sell the freehold and business, we do not want to sell the lease as we want a fresh start and need the capital to do so
In the 8 years we've had the business it has increased significantly, turnover of $200K up to $550K
In the four years it has been on the market the business has continued to grow with the net profit increasing by over $60K in this time, however the asking price is reducing.
The abridged net profit is about $160K
Our asking price is $490K
We were told that a return of 20-22% is required for a small country pub, which brings the asking price to 730-800K, well above ours!
Over the four years we've added more selling agents and are now listed with 4 agents
We continue to improve the building as our budget allows (ie we spent $14K upgrading the kitchen & cool rooms this year), but are hesitant to spend too much as it seems we wont get any return on this.

So my questions are:

1. Should we take it off the market for a while?
2. Are we listed with too many agents?
3. Should we invest more money renovating or should we spend money on marketing the sale?

Thanks in advance, any advice would be greatly appreciated!
 
please clarify lease

i don't quite follow. You are selling the business and land, but not the lease..what is the lease, what are you referring to here?

Please clarify
 
Sorry, we're not interested in just selling the business or leasehold and retaining the freehold - so we are only selling as a freehold going concern
 
What about signing a 10 + 10 + 10 lease to a different entity that you also control.

Then sell the freehold.

Then sell the business.

Or vice versa.
 
What are prices of similar pubs going for? ie similar beer sales, dining, accommodation, gaming?

Are there any reasons why people aren't interested eg is the town undesirable, does the owner have to do the cooking etc

Is your remuneration included in the $160,000 profit?

Have you had any lookers? Can you or the agent ask why they didn't take it any further.

Seems to me you have two choices either keep on doing the same old thing which isn't working or do as Daryl said but keep it simple

eg the options are:
a sell the freehold and business to one person
b sell the business as a leasehold eg $50,000 for a five year lease and rent of $X per week, then sell the freehold to an investor
c sell the freehold and lease it back and then sell the lease

instead of one market - owner/operator for a small pub, you have three markets - owner/operator, passive investor, and business owner.

Can you leave money in on a second mortgage?

What do your agents say? Have they made any recommendations? If not, why not?

Are any of the locals interested?
 
Thanks so much for the tips everyone. The business is already ran by a company that leases from a partnership- so quite easy to sell one or either. We have considered this option.

I think the fact that we cook ourselves has a big impact on potential sales- that has been the number one factor for potential purchaser choosing elsewhere (or that they've told us anyway)

Also the town is small, which for some could be consider a risk.

I would say there are many local pubs that are doing less than us but have a higher asking price.

Would you suggest a break from the market altogether? Start fresh?
 
Its tough selling a country pub now, I know a lot are closing down in my home state in regional and rural areas. Buying a pub is perhaps not the dream of the current generation(s).

Are there any options to get around a new owner needing to cook?
=> Are there any local cooks?
=> Can the kitchen be leased out?
=> What proportion of turnover is from the kitchen? (How badly would this hurt the value?)

Is there any other purpose for the building? If you shut the business down could it be repurposed - does the town need retail/accomodation or could it be tweaked into B&B (if there is any demand).

Have you thought about using social media?

I saw a Victorian pub raffled in the mid 90's (Harrow). It was $100 per ticket and the raffle was drawn once all tickets were sold.
 
Some good ideas in this thread, might be time to get creative/funky and more up to date with your marketing. Hulkster has a good idea using social media, some other ideas around marketing to people looking for a country change, might be couples out there who would like to get out of the big smoke and have always had ambitions of running a pub - how to market to them? maybe try a different angle as opposed to purely business/financial to sell the place.
 
Thanks so much for your thoughtful responses. You've really got the mind ticking. The idea of social media is appealing, as is the raffle but I think the legislation regarding lotteries is a bit tighter than it may have been in the 90's!

The food is the main draw card to the pub, we've got a good reputation for food... however the new owners certainly could lease out the kitchen. We've offered to stay on to cook until such time as they found a cook.

simtr - wholly agree that we need to target city folks looking for a tree change, a house in Melbourne is worth more than our pub!
 
Thanks in advance, any advice would be greatly appreciated!

IMO your problem is demographics. I know quite a number of successful boomers trying to exit good businesses. Some have just closed the doors, most are looking at much lower multiples than they initially sort. The fact seems to be that the following generations are not cashed up enough, not large enough and simply not as entrepreneurial as the boomers. This equals over supply, you are spoilt for choice if you are a buyer looking for a small enterprise.

I would consider making the business as attractive as possible sell it with a long and favourable lease (to the landlord) and then selling the freehold as a passive investment. Boomers are looking for passive income, demand should be better in this area.

Failing that put a manager in and market it as a hands off operation, again appealing to a boomer looking for easy income. They are where the cash is...

My 2c

I hope it makes some sense.
 
Makes perfect sense Zedlum - we are toying with the idea of taking it off the market for 3-4 months to give ourselves time to do some cosmetic works such as painting the residence, new carpets, new blinds, give it a really good tidy up. Meanwhile getting all our 13/14 finances up to date, getting some professional photos & remarketing with a big social media campaign and sticking with one agent who will work with the social media campaign. Then offering the business as a leasehold & then try to sell the property afterwards to investors. What would be an attractive return on a commercial investment? 11-13%?
 
I'm no expert but I gather it has a lot to do with the prospect of capital gains. The bigger the prospective gains the lower the yield. Given that, the country properties I have seen have been mostly in the 7 to 10% range, 10% seems to be the bench mark for country motels. I guess you may have to offer more if the building is in need of serious work and I would guess that there is not much in the way of deprecation to factor into the equation.

I am not a commercial property guru by any means... just here learning so take my words with salt.
 
You could consider a sale in reverse order depending on the lease situation.

Most hotels operate on 5 year leases with options in my experience so I'm hoping you are partway or most way through a 5 year period.

Offer the freehold for sale as an investment returning 8%-10% return and retain the business (which should be a fairly small amount of the overall value I'd gather $50k--$100k?).

If you sell the freehold, hopefully you get a decent price and only have mininal value tied up in the business. Try to sell the business for whatever you can get - If you are close to an option renewal you then have the prospect of not renewing and walking away leaving only $50k on the table (or maybe less/nothing if you achieve a strong freehold investment price).
 
Same here I don't follow your numbers.

But my first impression is it's a hard sell because you need to find someone with the PERFECT mindset and there's probably very few.

a) Someone who wants to live in a small country town (probably less than 100,000 people)
b) Someone who wants to live in your town (probably less than 20,000)
c) Someone who wants to own a property with the two criteria above (probably falling to 5,000 now)
d) Someone who wants to run a business and hit first 3 criteria, falling below 500 now
e) Someone who wants to run a motel, falling to less than 50
f) Someone who actually has the money (falling to less than 25)
g) Someone who has all that, and is prepared to take the risk, not many

For example, I'd hit only category (f) and wouldn't hit any of the other criteria. If someone leased the business, and I got a 15-20% yield for say 5-6 years, I'd consider buying the freehold. So maybe you have to sell it separately. Or if you leased back.
 
um, 20-22% is ridiculously bad even in metro standards!

Aust post is about 25%, smaller business' are anywhere between 33-50%

at 160k net profit, (is that after paying yourself or before)

given the location, it might be worth as low as $300k, but im not a regional area expert for business prices
 
I didn't read the message entirely. You can pick up bigger businesses for 35-50% in metro. But this comes with the land. Motels in metro I thought were around 15% land plus business.
 
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