Would-be pub magnate Tom Wallace, who agreed to the purchase of seven of the pubs from Jon Adgemis’ failed Public Hospitality portfolio, has forfeited millions in deposits after failing to settle.
Major lenders to Public Hospitality included Deutsche Bank, which appointed receivers McGrathNicol to offload many of the two-dozen pubs accumulated by Adgemis.
Seemingly following the same path, Wallace attempted to buy seven of his former venues in what was projected to become the foundations of a $150 million hospitality empire.
Wallace’s Millinium Capital settled on Paddington’s Rose Shamrock and Thistle, aka the Three Weeds for $20 million and on decommissioned pub the Town Hall Hotel in Balmain for $9.5 million, both sold in July last year, and on the Kurrajong in Erskineville for around $11 million, sold in September.
However, the proposed purchase of the former Noah’s Backpackers in Bondi for $60 million and Empire Hotel in Annandale for circa $20 million have fallen through and McGrathNicol has now terminated the sale contracts.
It has been reported Millinium was denied a chance to bid on sale of Balmain’s Exchange Hotel.
Still on the table was a transaction on the Hotel Diplomat in Potts Point. Previously known as the Bayswater Hotel, the venue is the result of two conjoined aged buildings, forming a 51-room hotel.
As he had done with several of the venues, Wallace sought to buy Hotel Diplomat with backing from Vantage Point Asset Management (VPAM), which is an authorised representative of Wallace’s Gibraltar Capital.
Millinium bid nearly $22 million for the Diplomat, but it was discovered that a rusted gutter box and cracked ceiling had been allowing water into the building, and Wallace attested this meant he could not complete the deal.
He sued McGrathNicol to return his $1.1 million deposit on the waterlogged building, alleging its condition had worsened during their time as it had been allowed it to become flooded, with water percolating through walls.
Rectifying the problem and damage was expected to cost at least $700k.
Wallace claimed the condition rendered the building uninsurable and its state had scuppered lender finance, presenting evidence in court from VPAM director Paul Thomas, who claimed he would not have attempted the purchase had he known the rectification works would not be undertaken to “restore all rooms to operational availability for use”.
Images of mushrooms sprouting from walls were submitted as further evidence.
But McGrathNicol disputed the claim, mounting a ‘caveat emptor’ (buyer beware) defence arguing Wallace agreed to buy the hotel on an as-is basis, and presenting documents showing the receivers had warned him of this risk in March.
Meanwhile, it has been revealed that Wallace had aspirations to resurrect the Adgemis empire as early as June 2025 – months before the high-profile bankruptcy.
Deutsche Bank held around $370 million in debt with Public Hospitality, through two syndicate loans, a convertible note and a mezzanine lending facility.
Hoping to stave off the collapse, Adgemis introduced Wallace to Deutsche Bank as he sought an angel investor.
Evidence to the court revealed a deal through VPAM offered Deutsche Bank $145 million to buy the debt, proposing $5 million upfront and the same amount two months later, ahead of a four-month settlement.
Deutsche declined the deal.
This month the Supreme Court of NSW dismissed Wallace’s claim for a refund, with Justice Ian Pike finding from the evidence submitted showed Wallace had made a commercial decision to not obtain insurance or see the deal through to completion, and instead attempted to negotiate “a commercial resolution”.
Millinium has now lost an estimated $5 million in deposits. Cost orders on the Diplomat case are yet to be issued, but they could prove substantial.
McGrathNicol is expected to return Noah’s and the Empire properties to market in the coming weeks, but their sale is unlikely to yield the same $80-plus million, which could result in the receivers pursuing Wallace for the difference.
