RUMOURS ABOUND, BUT REDCAPE STILL IN THE AIR

In Finance by Clyde Mooney

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Speculation around what is arguably the country’s most talked-about pub group continues, as investment banks look to realise $700m out of Australia’s smokin’ hotel sector.

The A-list portfolio that makes up Redcape Hotel Group has been seeking a suitor for more than two years. Its New York hedge fund owners York Capital and Värde have wanted to ‘mature’ the investment, which they purchased from renowned New York financial institution Goldman Sachs.

The original ‘preferred option’ for the sale of Redcape was an Initial Public Offering (IPO), following the lead of spin-off HPI, a REIT formed out of formerly Redcape freeholds.

After the formation of HPI, Redcape ‘fine-tuned’ itself out of a number of regional, non-core hotels, fuelling rumours it was optimising valuation in preparation for the float.

In late 2015, Business Insider speculated that property powerhouse Charter Hall was gearing up to partner with Woolworths-backed ALH to buy the portfolio, acting as landlord and operator to the (then) 24 pubs.

York and Värde were thought to be entertaining a trade sale given the volatility in the stock market in 2015.

Shortly after, a similar potential partnership between Moelis & Co and hotelier Nelson Meers emerged with similar plans. However, sources suggested the high-performing gaming-based assets of Redcape were proving a tough moving target to value, and no deal materialised involving either suitor.

September 2016 brought the news that Redcape’s former owner, Goldman Sachs, which purchased the 45-venue-strong portfolio in the wake of the GFC and resulting LVR crisis, had now been appointed to broker its sale.

As definitive news from stakeholders continues to fail to materialise, the rumour mill continues to grind the fate of the group, which currently counts 22 venues in NSW, three in Qld, and three freeholds in assorted states, including one in Victoria.

Last month, The Australian suggested the “little news” emerging on the deal may mean the group would soon shed some non-core assets, such as the Belrose Hotel – one of only four NSW pubs it owns ranked outside the L&G Top 200.

And today, the national paper proffered that the portfolio sale had been ‘put on ice’ after stalled talks with Charter Hall + ALH, caused by Woolworths’ preoccupation with the divestment of its failed Masters hardware stores.

It was suggested this is due to Värde being content to sit on the passive asset, although as previously reported by PubTIC, this is not normal practise for these types of funds, which would have been entertaining options to exit from day one.

But inside sources have revealed to PubTIC both the individual or small group sell-off and stalled sales process theories are off the mark, although no further details were provided. By implication, this could mean either a portfolio sale is still in the works or an IPO is gearing up.

Meanwhile, the Australian Pub Fund owned by the dynamic trio, John Singleton, Geoff Dixon and Mark Carnegie, continues to tease the market with its list-one-sell-another media-driven divestment campaign that has thus far listed the Marlborough Hotel and sold Riversdale’s Peakhurst Inn, Como, Bristol Arms and most recently Toxteth Hotels.

The powers behind Redcape are notoriously secretive, and aside from the dizzying sums involved, may also be working to take advantage of the high-profile discussions around the company’s fate.

PubTIC requested more – indeed any – detail, but CEO John Russell declined to comment.