Hotels Restaurants Pubs Leisure Leisure Property Specialists Investments On Market Issue 16/02 I know what you did last summer Graeme Bunn Managing Director Meteorologically at least, we are now a levels of growth achieved over recent years couple of weeks into Autumn with the long within the tenanted pubs sector, this should summer evenings behind us. It also appears be viewed as an impressive performance that the nation’s concerns of a post Brexit despite the challenges facing both the The summer of 2016 will no recession have been packed away with the company and the wider tenanted sector. sand encrusted surfboards as investors doubt be seen, in the future,“ “ and consumers alike have realised that the The summer also saw, at long last, after as a significant period in UK UK’s exit from the EU just might not cause months of Government procrastination, history. the economic collapse some politicians the introduction of the Pubs Code. Another suggested it would prior to 23rd June 2016. step forward for all involved in the UK pub sector, and particularly all those who care The UK service sector saw strong activity passionately about ensuring pubs flourish. in August as the Markit/CIPS Purchasing Managers’ Index (PMI) recorded its biggest The summer of 2016 will no doubt be seen, month on month rise in the survey’s history. in the future, as a significant period in UK UK retail sales also performed strongly, history, personally I am optimistic that it buoyed by the warmer weather and the won’t include reference to a recession. weaker pound. I suspect it will also not include any reference to England’s participation in a Also over the summer Punch Taverns certain football tournament, but let’s just reported their average profit per pub rose concentrate on the positives and remember by 4% between August 2015 and August the successes achieved in Rio. They should 2016, suggesting that they can start to look keep us warm in the months ahead. forward rather than back. Given the historic Cover image: Stepping up to the oche at Flight Club 2 On Market Issue 16/02 fleurets.com In this issue Market commentary INVESTMENTS M&A activity hots up in the regions 04 - 05 Investment commentary 16 Properties 17 Ed Sandall examines the corporate M&A activity across the pub, restaurant and hotel sectors. HOTELS Manchester: the UK’s second city 06 - 07 Hotel commentary 18 - 19 David Sutcliffe looks at Manchester’s leisure Properties 20 - 23 sector and the rents in the city’s prime spots. RESTAURANTS Market commentary Maximise the value of existing units 08 - 09 04 - 05 M&A activity hots up in the regions Restaurant commentary 24 - 25 Elysia Wilson-Gunn explores the methods in which some of the industry’s leading pubs are Properties 26 - 29 expanding their operations. PUBS London’s burning 10 Pub commentary 30 - 31 Which areas of London have been setting records with their rents? Philip Smith explores. Properties 32 - 45 LEISURE Are the storm clouds gathering? 11 Ben Peers, Fleurets’ resident Business Rates Leisure commentary 46 specialist reports the latest changes. Properties 47 “Man and boy” 12 - 13 Market commentary 06 - 07 Manchester: the UK’s second city With Fleurets veteran, Barry Gillham, retiring at the end of the month, the former chairman explores Fleurets through the decades. Decentralisation & diversification 14 - 15 Simon Hall takes a look at which operators are seeking sites in the UK’s regional cities, and what the benefits are. Market commentary 08 - 09 Maximise the value of existing units Important notice: Unless otherwise stated, all properties are being dealt with on a Sole Selling Rights basis. The prices Leisure Property Specialists and other particulars regarding properties are correct at the time of going to press, September 2016. As prices can Fleurets On Market be altered by the vendor at any time, interested potential buyers should check the latest position with Fleurets before Published by Fleurets Ltd viewing. The information contained in this publication is not 4 Roger Street, London WC1N 2JX to be reproduced in whole or in part without the expression permission in writing of Fleurets Ltd. Enquiries: Lizzie Hawes - PR Manager T: 020 7280 4700 © Copyright - Fleurets Ltd 2016 London. E: [email protected] ‘All rights reserved’. Market commentary W: fleurets.com/onmarket 10 - 11 “Man and boy” fleurets.com On Market Issue 16/02 3 M&A hots up in the regions Ed Sandall Divisional Director The last issue of On Market was published in April 2016, and since then there has been a flurry of M&A activity in the public house, bar and restaurant sectors, without significant collateral damage caused by the Brexit vote. The interesting facet of recent months has been growth in regional deals. In April Tesco confirmed the sale of the in London. It was put up for sale through rent of £3.5 million (£8,977/room) and Giraffe restaurant chain to Harry Ramsden’s Eastdil Secured and Rothschild in October reflected a net initial yield of just under 4%. owner, Boparan Restaurant Holdings Ltd. last year. Abu Dhabi sovereign wealth fund, The sale comprises 54 restaurants with a ADIA, is understood to have been close to national coverage, of which 12 are franchise agreeing a deal earlier this year, but no final There has been a sites, and three within Tesco stores. This agreement was reached. The sale secures a flurry“ of M&A activity in the transaction was swiftly followed by Tesco successful exit for Lone Star, which acquired public house, bar and restaurant divesting themselves of the coffee shop Atlas as part of its purchase of the £5.2 brand Harris + Hoole to Caffè Nero for an billion Rock and Salt non-performing loan sectors, without significant“ undisclosed sum. These transactions see portfolios from IBRC in 2014. At that time collateral damage caused by the the supermarket juggernaut move away the company was branded Somerston from food and beverage provision and focus Hotels. Atlas is held separately to Lone Brexit vote. on retail. Star’s £2 billion Amaris Hospitality, which owns 89 hotels including 29 Jurys Inns In June, Graphite Capital acquired the fast- Towards the latter part of the month, the and is aimed at a higher-end market. The growing pub and restaurant business, New property company London & Regional, company is likely to be sold or floated in the World Trading Company, for a reported £50 owned by billionaire brothers Ian and next two years. million. Founded by the owners of Living Richard Livingstone, purchased Atlas Ventures Group, the late Tim Bacon and Hotels, which owns 47 limited service On the direct investment side, Whitbread Jeremy Roberts, in 2011, NWTC now hotels operated under the Holiday Inn sold a Premier Inn Hub in King’s Cross for operates 14 pub/restaurants nationally. Express brand. The portfolio comprises £84.5 million. The 389 bedroom property We understand that the estate is entirely 5,575 bedrooms, 15% of which are located was held on a 25 year lease at an annual leasehold and the consideration reflects 4 On Market Issue 16/02 fleurets.com circa £3.6 million per site, pricing reflecting Midnight Bell, Duke of York and Crowd of interesting transaction as the portfolio the strength of the brand, the energy of the Favours. offered the purchaser the opportunity to management team and the innovative staff secure an experienced management team, engagement model. NWTC is expanding iconic Channel Island sites, and a fully rapidly, with sites planned to open in The interesting factor integrated business. The key opportunity for Sheffield, York and Reading in the coming “ in the post Brexit M&A Caledonia will undoubtedly be via bolt on months. acquisitions in the West Country. landscape is the re-emergence“ The NWTC deal was the last transaction of demand for regional Whilst the post Brexit transactions might prior to the Brexit vote and whilst we transactions. well have been committed to prior to the suspect there were more transactions where vote, it is encouraging that deals are still Brexit break clauses were operated and not progressing. publicly reported, the most public casualty Not to be outdone, Cornwall-based St was Revolution Bar Group pulling out of Austell Brewery Company acquired fellow a £16 million, four property acquisition in West Country brewer and pub company, Scotland. Bath Ales. The deal, which completed for an undisclosed sum, includes the Bath Ales The interesting factor in the post Brexit brewery, its portfolio of beer brands and M&A landscape is the re-emergence of its 11-strong pub estate in Bristol, Bath, demand for regional transactions. This Cirencester and Oxford. correlates with activity in our regional office network where enquiry levels and The largest post Brexit transaction to date transaction volumes are both up, resulting in was the sale of the Liberation Group to increased values for good quality assets. Caledonia Investments Ltd by LGV Capital The first transaction after 23 June was the for £118 million. Liberation Group has northern brewer and retailer Camerons, 94 pubs in the Channel Islands and the acquiring Leeds Brewery’s six pub estate. West Country, two breweries and three The Leeds Brewery Estate is entirely wholesale businesses. We understand that leasehold and comprises of the Eagle and the transaction reflected circa eight times Child, Lamb & Flag, The White Swan, The pre head office EBITDA. This was a very fleurets.com On Market Issue 16/02 5 Manchester: the UK’s second city leading the way David Sutcliffe improved transport links, the fully integrated Elsewhere in Manchester, rents continue Director public transport network, re-development to grow, with sites on Deansgate now of city centre sites for residential purposes commanding rents of around £40 per sq ft.