As rumours circle around the fate of one of Australia’s largest and most influential operators, the reality of investment capital in Aussie pubs stays the same.
Redcape Hotel Group owns and operates 23 freehold going concerns, with a portfolio value of around $700 million. It is owned by New York entities Värde Partners and York Capital Management, which acquired it via Goldman Sachs, following the wholesale purchase of Redcape’s debt in the post-GFC fallout in 2011.
As occurred with short-term owner Goldman Sachs, the capital brokers have always had an eye on a suitable exit and realisation of profits in the investment. Since early last year this has manifested in the form of either an IPO (Initial Public Offering) or portfolio sale to a suitable party – likely another operator.
Suitors that have emerged include the collaboration between investment bank Moelis and operator Nelson Meers, and a new group formed by property investors Charter Hall with the Woolworths-backed ALH. While both have the funds and resources to take on the portfolio, deals have not transpired, with sources pointing to the problem with pricing a moving target such as the gaming-centric Redcape hotels.
The relative shortage of A-grade assets – particularly the kind of top-ranking gaming pubs held by Redcape – has fuelled the incentive to acquire the group, with reduction to competition weighing in on top of asset desirability.
The latest rumour regarding a Värde-York divestment centres on a trade sale of Redcape, although candidates are few and far between to buy the entire package.
However, sources tell PubTIC that far from representing a nervous retreat from the Australian pub sector, Värde and York are merely exploring all options with a view to the inevitable strategic exit systemic to that industry.
Furthermore, it is believed Värde and York are not averse to this form of hospitality investment, and actually more likely to make further acquisitions before finally selling some or all interest in Redcape.
New acquisitions would bolster the tone of a divestment process, demonstrating ongoing potential and opportunities over reducing exposure through individual or groups sales. The Group has offloaded a swag of ‘non-core’ assets in the past year or so.
Strategic investments such as the Redcape portfolio typically occur in arrangements of a maximum seven years, and on average last far fewer than seven years. Such players won’t be seen manufacturing an excuse to jump in the eleventh hour, and accordingly entertain any opportunity any time.
The one thing that can be assured with the sale of the Redcape properties is that the current owners will continue to weigh all options possible until one such deal is done.
