Commercial property finance
Buying the pub and the freehold together: how a bank splits the deal.
A bank treats a pub freehold going concern as two forms of security in one purchase: the property, valued on what the land and building would be worth to another buyer, and the business, valued on its trading earnings. The liquor licence and any gaming rights sit alongside, and the transfer has to be approved before the new owner can trade. The freehold is the lender's main security and the earnings have to service the loan, so the split between the two decides how much a lender will provide.
A pub purchase bundles a freehold, a business and a licence.
Pubs are changing hands at pace: in July, HTL Property's Andrew Jolliffe told realcommercial that national pub transaction volumes this year had been greater than in any year on record except 2022. The market runs from a $695,000 freehold going concern listed in Adelong, New South Wales, to the Crown Hotel in Camden, New South Wales, which sold for around $24 million with 20 motel rooms and 24 gaming entitlements.
A price like that bundles three things that a lender pulls apart. The first is the freehold, meaning the land and the building. The second is the going concern, meaning the trading business with its takings, stock, fit-out, staff and track record. The third is the liquor licence and any gaming rights, which depend on who operates the venue and what the regulator approves. How much value a lender gives the licence and any gaming entitlements varies, and many lend cautiously against them because they depend on an approved operator and the regulator's sign-off.
A lender's assessment of a pub purchase follows that split, because each part carries a different risk, and that is how the credit teams I worked alongside read these deals.
A bank values the freehold and the business separately.
Two valuations sit behind one purchase price. The property is valued as real estate, on what the land and building would be worth to another buyer. The business is valued on what it earns.
An independent valuer values the land and building as a property that a different buyer could take on. The lender holds it as mortgage security and can sell it without the current operator.
The business is assessed on its trading history and earnings, and the lender tests whether those earnings can service the loan with room to spare. Its value depends on the person running it.
A Hobart waterfront building shows why the split matters. After Pub Banc Group, which held the lease over two venues at 11 Franklin Wharf, went into voluntary administration, the building was listed in July 2026 with vacant possession, and the agents said that opened the freehold to a wider buyer pool than hospitality operators. The operator had failed, and the property could still be sold to buyers outside the pub trade.
The same idea sits behind a Carlton pub corner listed in September for the first time in more than 60 years. Its agent expects the site's football history to widen the buyer pool beyond publicans, with the price guide in the high $2 million range.
| Part of the purchase | How a lender values it | What it adds to the decision |
|---|---|---|
| Freehold | Independent valuation of the land and building | Mortgage security that stands without the operator |
| Going concern | Trading history, takings and earnings | The cash flow that services the repayments |
| Licence and gaming rights | Through the earnings they make possible | Approval of the transfer is needed before the new owner can trade |
How much can you borrow for a freehold going concern?
The loan is sized against both halves, and the tighter of the two tests tends to set the limit. On the property side the lender applies a loan-to-value ratio to the freehold valuation. As a broad guide, the freehold in a pub deal often sits around 55% to 65% LVR, depending on the venue, its trading and the location. On the business side the lender looks at earnings cover against the repayments, and the benchmark I set out in how banks fund business acquisitions is around 1.5 times.
Rates feed straight into that second test. The RBA has lifted the cash rate a full percentage point in 2026, to 4.60% at its 29 September decision, and the cover test reads the loan's interest cost, so each rise lowers the debt that a given level of earnings can carry. Most floating commercial facilities price off BBSW plus a margin, which I covered in the BBSW piece.
Goodwill is where the two halves disagree. The part of the price above the property value and the stock is goodwill, and a lender typically lends against less of it than against bricks and mortar, because it exists only while the business keeps trading. Lenders lend a much smaller share against goodwill than against the freehold, and on some deals nothing at all, so the size of the goodwill often decides how much equity the buyer needs. A buyer who needs more than the lender will provide covers the gap with their own equity or a deferred payment agreed with the seller, which sits behind the bank loan (see how lenders treat deferred payments).
Property equity behind a purchase also changes the shape of the loan, which is the fork I described in do you need property to buy a business. A pub freehold supplies that equity inside the deal itself, and our commercial property finance in Melbourne page sets out how we approach the property side.
Pub deals tend to go wrong in four places.
Trading that does not carry over. Takings under a long-standing publican can reflect that person's presence. A lender tests the buyer's realistic forecast, so verify the figures against the accounts and bank statements rather than the sale memorandum.
An operator or group that fails. The Hobart case above is one example. Another is the collapse of a Sydney pub group with debts above $1.8 billion after its backer called in the loans. One buyer picked up several of its venues and missed out on three after failing to secure private financing, which shows that the funding has to be certain before the purchase is.
Two forms of security, one lender. When one lender holds both the freehold and the business, trouble in the business puts the property facility under review as well, because the two are tied together.
Approvals out of step with settlement. The licence transfer and the finance approval both have to land before the settlement date, so ask your solicitor which approvals your contract depends on and when each is due.
Settle the structure before you sign the contract.
A contract signed before the structure is tested leaves the buyer holding the price whatever the lender decides, unless finance is a condition of the contract. I'm happy to look at the freehold valuation and the trading accounts together before that point, and to say plainly how a credit team is likely to read the two halves. The same preparation applies to acquisition finance more broadly, and to our commercial property finance work.