The high-profile sale of the Keystone portfolio has taken a twist, with creditors KKR helping Dixon Hospitality into a $40m deal for six Sydney venues including Kingsley’s fine-dining restaurant.
Despite previous statements denying interest in assets of the beleaguered The Keystone Group (TKSG), which fell into receivership in June after falling foul of debt covenants with private equity groups KKR and Olympus Capital, the Melbourne-based Dixon Hospitality Group (DHG) made a surprise late entry to the bidder line-up.
Ferrier Hodgson (FH) was appointed by Keystone’s creditors to manage the liquidation, and engaged CBRE Hotels’ national director Daniel Dragicevich and NSW director Sam Handy to market the Australia-wide Keystone collection of 17 pubs and restaurants.
Yesterday saw the announcement that DHG will take over immediate operation in six of TKSG’s Sydney venues – the two Darling Harbour pubs Bungalow 8 and Cargo, The Winery and Manly Wine, CBD bar The Rook, and Woolloomooloo fine-dining restaurant Kingsley’s.
While sale price wasn’t revealed, sources say the package was close to $40 million, with finance provided by KKR – effectively funding their own debt repayment.
FH disclosed that Dixon’s interest in Chophouse Sydney had fallen through, but other parties are still negotiating for the high-end steakhouse, for a price believed circa $4m.
The leasehold business on the Group’s once flagship four-level Kings Cross pub Sugarmill, decimated by the State government lockout laws’ effect on the precinct, was sold back to the freeholder relative of one of TKSG’s founders for a modest sum.
It is understood the suite of Jamie’s Italian restaurants will be sold as a package, and likely to fetch closer to $10m. Campaigns remain open on the remaining leases.
Even taking into account the sales still set to manifest, the total is distinctly short of the $80m believed to be owed by TKSG to the financiers for buying the ten dining operations two years ago – let alone any value of TKSG’s original seven venues.
It is unclear if creditors will pursue further action against TKSG directors, but sources say the directors were quite well protected from personal guarantees.
In the meantime, creditors and FH are reportedly very happy with the contract exchange with DHG, which burst into prominence after rapid expansion that included the wholesale acquisition of entire groups, such as the Open Door Pub Co’s 17 pubs, the three Drink n Dine pubs, and the five Beer Deluxe pubs.
“Selling these high quality venues to a well-established hospitality group is a great outcome for patrons and staff,” said FH’s Morgan Kelly.
The FH announcement stated DHG would take over operations from yesterday, although possession would not officially change until settlement. Existing management are said to be staying on to ensure “a smooth transition”, but sources say they will not remain in place.
The sale campaign, involving venues in Sydney, Melbourne, Brisbane, Adelaide and Perth, presented logistical challenges on top of the sensitive nature of the receiver sale. Dragicevich says DHG, which has fed rumours of an IPO for its rapidly-acquired book of leaseholds, now has further ammunition for its conquest.
“This important mandate attracted international interest and involved transacting a very diverse mix of businesses across five capital cities.
“The iconic nature of the Keystone venues is aligned with Dixon Hospitality’s existing stable of brands and this acquisition now gives them the necessary strategic platform to execute their well-publicised expansion plans.”
Further announcements on remaining assets are expected in coming days.