Ben Hurley Reporter

Ben covers the property industry and has a keen interest in entrepreneurship and travel writing. He speaks Mandarin and previously covered housing and urban affairs for The Australian Financial Review.

View more articles from Ben Hurley

Feel the noise: Struggling pubs face the end of the music as residents and costs unplug bands

Published 28 February 2013 11:44, Updated 04 February 2014 00:15

+font -font print
Feel the noise: Struggling pubs face the end of the music as residents and costs unplug bands

Jet’s Nic Cester plays to an enthusiastic crowd at the Annandale Hotel. Small and atmospheric, the Annadale has been a mainstay of the Sydney live music scene for decades. Photo: Domino Postiglione

Iconic Sydney music venue the Annandale Hotel is the latest casualty in the ailing pubs sector, where rising costs and tight margins are sending watering holes and music venues around the country over the edge.

The Annandale is now in receivership due to a raft of problems related to the former working-class suburb’s gentrification: rising rents and legal costs associated with resident complaints.

Leichhardt Council mayor Darcy Byrne has been an outspoken supporter of the venue, saying the pub’s plight is a “wake-up call to everyone who supports live music”.

There’s a cultural change that happens in somewhere like Annandale. You’re moving from the inner city worker to the inner city yuppie.

But his council is also a key reason for its downfall, fighting a lengthy Land and Environment Court battle against the hotel after a group of residents complained about the noise. The Annandale won, but reportedly paid more than $250,000 in legal fees.

But the issues facing the pub industry go deeper than complaints, which have been a problem for publicans for as long as pubs have been noisy. Pub values soared in the years leading up to the financial crisis, and banks were liberal with their loan to value ratios, leading some prospective publicans to simply pay too much. A crunch in values in recent years has put pressure on margins in both city and country pubs.

Hotel broker Nicholas Tinning from Chris Tinning & Company says banks were willing to lend up to 80 per cent of a hotel’s value a few years ago, but now it is closer to 50 or 60 per cent and some lenders are sending “nasty letters” asking for a loan top-up.

“We’ve been in a receivership phase for about two years,” Tinning says. “The marketplace has re-adjusted, particularly in NSW where we saw hotel values explode.

“The main difficulty we face at the moment is every expense we have is increasing – electricity is going up, insurance is going up, wages are going up, and the more we put the price of beer up, the more the average person says hey we can’t afford this.”

Another recent casualty is the Olympic Hotel in Cootamundra, which closed its doors in October last year as the owners struggled to get on top of financial woes. The nearby Cootamundra Hotel went into receivership a few months prior.

Tinning says noise complaints and associated legal costs have more impact when the businesses are doing it tough. Noise legislation protected pre-established music pubs, but if they stop for a few months it is hard to start up again for legal reasons, he says.

“There seems to be more power to the individual than there does to the business,” Tinning says.

“There’s a cultural change that happens in somewhere like Annandale. You’re moving from the inner city worker to the inner city yuppie who would rather sit in a coffee shop and read the financial papers compared to the guy who wants to have five beers after work and listen to some music.”

He thinks the downturn is almost over although some pub owners have zero or negative equity and won’t escape with their shirts.

“I’ve seen this roll around twice before in the 26 years I’ve been doing this hotel brokerage. We’re fairly close to the bottom.”

Topics:

Comments