It is a practice started more than 15 years ago in the office and retail world, as companies sold the traditional bricks and mortar head office tower, but stayed as the tenant. The cash raised was used to to grow and expand the business.

The process was the trigger for the establishment of many of the current real estate investment trusts.

Now the pub and hospitality sector is seeing a range of deals following the same principle.

Under the latest deal, the well-known Keystone Group is selling its Sugarmills Hotel and Office Complex 33-37 Darlinghurst Road, Potts Point on a sale on a 20-year leaseback basis, through JLL Hotels & Hospitality Group and Colliers International.

It follows a string of passive investment hotels recently sold on a sale and leaseback basis by national operators looking to release equity tied up in freehold assets to pursue the abundance of new operating opportunities emerging in new precincts around the nation's capitals.

John Musca, the national director at JLL Hotels, said clients are now embracing the concept.

"When operators in any asset class seek to liberate dormant capital for brand expansion nationally, in a low interest rate extremely receptive trading environment, investors seeking annuity incomes will ultimately benefit," Mr Musca said.

The hotel is expected to fetch about $20 million and will follow JLL and Colliers recent sale of the Oxford Hotel Darlinghurst on a sale and leaseback basis also, for $12.75 million. The Heritage collection of buildings in Surry Hills, including the prominently tenanted Keystone 'Winery Bar', also recently sold for about $50 million on a low 7 per cent yield.

The private owners of the Gazebo Wine Garden at 2 Elizabeth Bay Road, Potts Point, are also selling the site, but with the Keystone Group's long lease.

Gunning Commercial's Tom Speakman, who is selling the Gazebo, said demand for high quality, well-let hospitality assets has gained momentum in the past year.

JLL jointly sold the Golden Sheaf Hotel, Double Bay for $43 million on a 6.5 per cent yield, which was the largest single sale and leaseback pub transaction ever recorded in Sydney.

Mr Musca said the deal highlighted, "investors recognition of the tenants pedigree and the capital flight to yield in this unique and increasingly sought after retail asset class".

"The sale of Strattons Hotel in the city on a 5 per cent yield recently also supports this", he suggested. The Sugarmills complex includes a four level operating hotel including recently completed rooftop bar, on a 570 square metre site with three street frontages.

"The long lease and exceptional property location, will certainly appeal to offshore investors seeking a quality Sydney city fringe land-banking opportunity and passive secure income" Mr Steam Leung of Colliers International.