On Market Issue 17/01
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Hotels Restaurants Pubs Leisure Leisure Property Specialists Investments On Market Issue 17/01 FUNDING FAMILY BREWERS BRISTOL IN BLOOM We quiz some of the top banks Chairman Martin Willis explores Our new Head of Retail Leisure about funding for the hospitality how they have shaped the drinks & Restaurants explores Bristol’s sector. market. casual dining market. A Punchy start to 2017 Graeme Bunn Managing Director With Q1 2017 already consigned to the Capital, an investment partner of Invesco past, it would appear that the leisure sector Real Estate, for a reported €450 million. is continuing to defy pessimistic forecasts, The company operates 8,639 hostel bed alongside a UK economy which continues spaces in locations including London, Paris to do the same. We have seen better than and Copenhagen. Clearly Patron hope to expected GDP growth, with the economy use some of the funds generated from expanding by 1.8% as a whole during 2016. selling Generator Hostels in the acquisition Fleurets was recently UK unemployment also continues to fall of Punch, subject to the outcome of the announced by EGi as the most with the unemployment rate now 4.7% CMA investigation, will see Heineken and active agent in the leisure and - its lowest level since 1975. Therefore Patron acquire all 3,350 pubs for just over it is perhaps of little surprise that the UK £400 million. hotel sector for the first time population continues to enjoy staying, in our history. drinking and dining out. Perhaps the best Headwinds remain, however, not least with barometer of the leisure sector trading the Business Rates Revaluation which will environment within the UK is represented see many businesses suffering upto a 42% by JD Wetherspoon PLC who reported increase in business rates payable as of this 3.3% like-for-like sales over H1 FY17. month. The imminent introduction of the Across in the restaurant sector, Wagamama Apprenticeship Levy will also add to the tax reported average restaurant sales of almost burden of most multiple operators. £42,000 per week in January, which compares to the same restaurant sales two However, there is still much to celebrate years prior of £34,000 per week. and enjoy from the leisure sector. It remains a significant and growing part of the UK It is little wonder therefore that the leisure economy and Fleurets is delighted to play sector remains attractive to investors. our part in its success. Fleurets was recently Canadian based real estate investor, Jimmy announced by EGi as 2016’s Most Active Lai, acquired 170 pubs let to the Spirit Agent in the leisure and hotel sector for the Group from Cerberus in a deal reported to first time in our history. Our challenge is to be worth £400 million. Within the hotel remain in pole position for 2017. sector, Generator Hostels, was acquired by Queensgate Investment from Patron Cover image: Virgin Active, Repton Park 2 On Market Issue 17/01 fleurets.com Contents Market Commentary In this issue 04 - 05 M&A Activity - Alive and Well Market commentary INVESTMENTS M&A Activity - Alive and Well 04 - 05 Investment commentary 18 -19 Paul Hardwick looks at corporate M&A activity HOTELS across the pubs hotels and restaurant sectors. Hotel commentary 20 - 21 Lifestyle Businesses 06 - 07 Properties 22 - 25 What constitutes a lifestlye business? and how do you find one? Simon Bland explores the trend. RESTAURANTS Restaurant commentary 26 - 27 Can I Secure the Funding? 08 - 11 Properties 28 - 29 Representatives from Metro Bank, Lloyds, Market Commentary Barclays and NatWest discuss funding. PUBS 06 - 07 Lifestyle Businesses & Where To Find Them Birmingham 12 - 13 Pub commentary 30 - 31 Exploring development and investment and the Properties 32 - 45 effects on Birmingham’s hospitality industry. LEISURE Bristol in Bloom 14 - 15 Leisure commentary 46 - 47 Kevin Conibear, our new Head of Retail Leisure & Restaurants looks at Bristol’s casual dining market. Family Brewers 16 - 17 Chairman Martin Willis explores the role of the family brewers within the drinks market. Market Commentary 08 - 09 Can I Secure the Funding? Market Commentary 14 - 15 Bristol in Bloom Important notice: Unless otherwise stated, all properties are being dealt with on a Sole Selling Rights basis. The prices and other particulars regarding properties are correct Leisure Property Specialists at the time of going to press, May 2017. As prices can be altered by the vendor at any time, interested potential Fleurets On Market buyers should check the latest position with Fleurets before viewing. The information contained in this publication is not Published by Fleurets Ltd to be reproduced in whole or in part without the expression 4 Roger Street, London WC1N 2JX permission in writing of Fleurets Ltd. Enquiries: Lizzie Hawes - PR and Marketing Manager © Copyright - Fleurets Ltd. 2017 London. T: 020 7280 4745 E: [email protected] ‘All rights reserved’. W: fleurets.com/onmarket fleurets.com On Market Issue 17/01 3 M&A Activity - Alive and Well Paul Hardwick Director & Head of Hotels 2016 fell short of the previous year in terms of transaction volume, albeit this is perhaps a reflection of the exceptional levels of activity witnessed in 2015, rather than a sign of market deterioration in 2016. Furthermore, some players were distracted whilst digesting the fruits of their previous harvest. Of course, the referendum caused a brief hiatus, although any blip in activity approximately £48,000 per key. Both a blended net initial yield of around has seemingly passed, the last few months transactions appeared to offer value to 4.75%. Once of interest to only specialist witnessing significant activity across all of the buyers, pricing reflecting a substantial investors, pubs are now firmly accepted as a the leisure property sectors. discount of about 25% to returns often mainstream investment asset class. witnessed for the Travelodge covenant Hotels witnessed two portfolio investment and for assets offering long term, upward transactions, both involving Travelodge. only RPI linked income with strong trading Secure Income REIT acquired a portfolio fundamentals. The referendum caused a of 55 Travelodge investments for around brief hiatus, although any £200 million, reflecting a net initial yield of The pub sector attracted continued investor around 7%. This was followed a month later appetite as LaSalle Investment Management blip in activity has seemingly by Mansford’s acquisition of the Booking acquired a portfolio of six pub investments passed Portfolio of 17 long leasehold Travelodge let to subsidiaries of three major pub investments for a shade over £28 million, operators located predominantly in the again reflecting a net initial yield of 7%, South East for £17.8 million, reflecting It is, however, activity from trade buyers that has dominated the headlines. DW Sports acquired Fitness First and its 62 clubs in a deal reported at £70m, increasing its portfolio from 78 to 140 units in September, which turned out to be a busy month. Famous Brands acquired Gourmet Burger Kitchen and its 75 UK sites for around £120 million (£1.6m per site). Hot on the heels was Boparan Restaurants Holdings’, owner of Giraffe, acquisition of the Ed’s Easy Diner brand, head office team and 33 restaurants in a pre-pack administration; and Stonegate Pub Company acquired 10 units from JD Wetherspoon, taking Stonegate to a total of 664 sites. September also saw Singha Estate and Fico Corporation acquire three provincially located branded hotels providing 229 rooms, off a guide price of £12 million, reflecting around £52,000 per key and, of 4 On Market Issue 17/01 fleurets.com course, Marriott International completed its approximately £113,000 per key. The opportunities will also arise as recent modest acquisition of Starwood Hotels & group now comprises approximately 3,000 buyers gradually consolidate and rationalise Resorts, creating the world’s largest hotel bedrooms spread nationally. their estates. There are certainly the right company in a £13 billion merger involving ingredients for an active 2017. around 5,700 hotels with 1.1 million rooms Several notable deals brought the year across 110 countries. to a close, spanning the pub, restaurant and leisure sectors. Lion Capital acquired After a quiet October, November picked up the majority stake in Loungers, a group again with Shepherd Neame’s acquisition comprising 94 sites, valuing the business of Village Green Restaurants Limited, which at £137m. Stonegate acquired Intertain operated five freehold pub restaurants in from Better Capital, the group operating its Kentish heartland, for £11.85 million the Walkabout chain of bars for a price (£2.37m per site), reflecting approximately believed to be in the region of £39m 13 times operating profit. reflecting circa 5 times EBITDA. Dominion Hospitality acquired 28 hotels and pubs from the privately owned Chapman Group Opportunities will also arise for an undisclosed price and, in the year’s biggest story to hit the pub headlines, as recent buyers gradually Punch agreed to a £402.7 million takeover consolidate and rationalise offer from private equity firm Patron Capital Advisors and Dutch brewer Heineken. The their estates. There are deal reflects approximately 10 times Punch’s certainly the right ingredients EBITDA and would involve around 3,300 public houses. for an active 2017. Whilst activity has perhaps been a little subdued at the time of writing (which is Following a major £100m refinancing earlier often the case in the early months of the in the year, Newcastle based hotel and bar year), there is a competitive pool of well operator, Cairn Group, continued on the funded ready buyers across the spectrum. expansion trail with the acquisition five With several opportunities already in hotels out of the Hotel Collection portfolio the market, in addition to a steady flow off a guide price of £75 million, reflecting of unsolicited acquisition approaches Reef Bar, Walkabout, Solihull fleurets.com On Market Issue 17/01 5 Lifestyle Businesses and Where To Find Them Simon Bland These are mostly small businesses providing Bridging the gap between hospitality Associate modest incomes but usually crucially businesses and the licensed trade, a pub including a house.