Lantern Group executive director Russell Naylor said the deal was funded through the group's main finance facility.

"There remains strong demand for pubs and we are always looking at quality hotels where we can add value," Mr Naylor said.

"The sector is fairly robust at the moment with reasonable supply to satisfy the demand from investors and hotel owner/operators."

In the past six weeks, about $1 billion worth of pubs have been sold, boosted by the $603 million acquisition by Charter Hall of Woolworths' ALH portfolio of 54 pubs.

Mr Naylor said the group had agreed to conditional terms to acquire the Exchange Hotel on Newcastle's Beaumont Street for $9.25 million.

The new pubs will add to the listed group's portfolio of 11 pubs in NSW, including the Crown in Surry Hills and one in Queensland.

The Waterworks Hotel was sold through the vice-president of NSW investment sales at JLL Hotels & Hospitality Group, Sam Handy, in an off-market deal.

Mr Handy said the Waterworks Hotel was straddled by the Port of Sydney and Sydney Airport, and had 20 gaming machines (SIA 26) and a 24-hour liquor licence, allowing it to benefit from the area's residential gentrification and growing industrialisation.

"The discreet off-market sale was keenly contested and yielded four genuine offers to purchase which demonstrates the renewed depth in the market for quality metropolitan Sydney freehold pubs," Mr Handy said.

"This sale takes the number to 21 pubs that JLL Hotels & Hospitality has transacted across NSW alone in 2014."

Other pubs on the market include the Grand Hotel at Rockdale, with an estimated value of $27 million, and the Hotel Bondi, both through JLL Hotels & Hospitality.