Sydney pub the Sando likely to be developed as white knight deadline passes

The Sando is likely to be redeveloped into apartments after the pub's owner failed to find a buyer or partner to save the iconic live music pub, which went into receivership in July with a debt to Bankwest of $3.6 million.

Expressions of interest closed yesterday for Sydney's Sandringham Hotel, immortalised by The Whitlams in the songs God Drinks at the Sando and Blow Up the Pokies.

Even support from the great and good in the music industry failed to save The Sando despite a free concert in Martin Place earlier this week to draw attention to the pub's plight fronted by Mark Evans, formerly of AC/DC, Mark Gable of The Choirboys and Doc Neeson of The Angels.

Tony Townsend, owner of The Sando, told SmartCompany a number of rallies had been held to draw attention to the pub's plight but expressions of interest had closed and he is not aware of any offers.

"We were not able to uncover the white knight, unfortunately," says Townsend.

"We have tried a number of times to bring the bank to the table and we have actually made a few offers to the bank and at this point of time they are going to take it to due process."

Townsend claims The Sando was highly leveraged at around 65% when Bankwest (which was taken over by the Commonwealth Bank) called in its facility and gave him seven days to pay $3.2 million.

"I was very upset by some of the things that were said by Commonwealth Bank and the receivers as they were misleading to say the least; things like we never paid or defaulted on paying our interest, that was just not true," he says.

"Until the bank sent its letter of demand on we paid every single interest payment, the only default we had was a loan value ratio default which is a minor default."

Townsend says he ran a "very tight business" but it was very marginal and once the receivers, Ferrier Hodgson, were called in it was very difficult to save the business.

"We've worked through a number of solutions since that letter of demand but it's very difficult when you have a scenario of interest jumping from $16,000 to $48,000 per month plus other costs, such as the receiver's costs and legal costs," he says.

"It's just a recipe for disaster, especially when you put your hand out to the bank and said we are in trouble, we need you to give us a hand, that's the sort of hand we got given."

Townsend says he is planning legal action and is also making a submission to the Senate Inquiry into the banking sector, which is investigating claims as to whether the Commonwealth Bank sought to liquidate Bankwest customers to reduce the price paid for Bankwest.

"It will go to court and we will be seeking damages. It appears that the Financial Ombudsman Service can't do a lot until somebody actually takes the business away from you. The court can't stop the process until you lose it."

Townsend says while he initially hoped to find a partner to enter into a joint venture to keep The Sando as a live music venue, it was difficult because live music venues only return around 6% while pubs which have gaming return about 14%.

"We tried to raise awareness of what a hotel like The Sando is in a community like Newtown and what it means to a community like the music community and, unfortunately, we were not able to uncover anyone who had an empathy for that use," he says.

Townsend expects The Sando will be sold cheaply to developers and will no longer operate as a live music venue. He says the property is zoned for accommodation and can be built to four storeys.

"Someone will make $5 million or $6 million out of it," he says.

"They won't pay full value for it, they'll pay fire sale value for it and it will just be another live venue gone."

Michael Cave, spokesperson for Ferrier Hodgson, told SmartCompany it was still "early days" in the process and the receivers are still dealing with the "numerous" expressions of interest that came in.

He says the Sandringham Hotel business had been in financial difficulty since mid-2009, and Townsend has been issued with numerous breach and default notices, with his account in arrears throughout 2011 and the first half of 2012.

"The bank took the decision to appoint receivers only after considering all available options and going to extraordinary lengths in an attempt to help the customer resolve his financial issues," Cave said in a statement.

The Commonwealth Bank directed SmartCompany to a statement it issued last month entitled "Facts about The Sandringham Hotel", which said Townsend was in default throughout 2009 and 2010, including non-payment of interest on the debt and also non-payment of land tax to the NSW Office of State Revenue.

"As the customer did not take the necessary steps to resolve his financial issues and following an extensive period of time working with the customer, the Bank appointed receivers in July, 2012," the statement said.

This article originally appeared on SmartCompany.