The Adgemis Public Hospitality empire is in flux again, threatening its refinancing efforts, as two pubs in the portfolio enter administration alongside a record-breaking number of Aussie businesses.
Public Hospitality Group (PHG) is scrambling to retain its collection of over 20 pubs across Sydney and Melbourne, but despite ongoing negotiations one of its financiers has called time on Paddington’s The Rose, and the Kurrajong Hotel in Erskineville.
According to documents filed with the Australian Securities and Investments Commission (ASIC), insolvency firm Ankura has been appointed as external administrator at The Oxford Rose P/L and 106 Swanson Street P/L, trading as The Kurrajong.
Former KPMG senior M&A advisory partner Jon Adgemis began investing heavily in hospitality around 2018, acquiring properties seen as prime for uplift, such as The Strand in Darlinghurst, bought from Oscars in 2021, the Lady Hampshire of Camperdown, acquired in 2022, and Guy Grossi’s Puttanesca Osteria, in Melbourne.
The Rose Hotel was a classic example, having stood empty for years. PHG took over in 2022 with plans for an Oxford St hub.
Having accumulated debts said to be in the region of $500 million, with caveats on many of the properties, news of a major refinancing deal emerged at the end of May in the amount of $400 million, suggesting a number of properties may need to be divested to cover the shortfall.
While which properties would be sold has remained the topic of speculation, the forfeiture of the Rose and Kurrajong may undo the debt restructuring.
PHG this week contributed to a joint statement with stakeholders of the Greek community’s Hellenic Club that the pub group would surrender operations at the club to Con Dedes’ Dedes Waterfront Group, effective immediately.
Public’s woes come as insolvencies for Australian businesses hit a record high – up 38 per cent year-on-year on average across all industries.
The number of insolvency appointments reached 1,245 in May, which is 44 per cent more than the 866 in May 2023, and up a whopping 122 per cent on 2022, and the highest number since ASIC’s formation in 1999.
Contributing to the peak, B2B payment defaults also hit a new record in May, up 21 per cent on what was already a record, in April, and 58 per cent more than 2023.
There is a reportedly strong correlation between payment defaults and business failure; CreditorWatch says a business has a 20 per cent chance of failure in the following 12 months if it has a default registered against it.
Food and Beverage Services is ranked the most at-risk industry, recording a 7.54 per cent failure rate, and the highest ranked industry for outstanding ATO tax debts greater than $100K.
F&B comes in second on industries experiencing the highest proportion of late payments, at 8.75 per cent, behind construction.
The regions said to display the highest risk of business failure are western Sydney and south-east Queensland.
These record high figures are seen to be the result of the impacts of stubbornly high inflation, declining consumer demand, and interest rates, which are unlikely to fall before the end of the year.
One point of positivity on the horizon for consumers is the pending Federal tax cuts, but the company doubts much of this additional money in the household kitty will go to discretionary spending.
“We don’t expect a meaningful turnaround in consumer confidence until the impact of at least two rate cuts has been felt, which won’t be until well into 2025,” bodes CreditorWatch CEO Patrick Coghlan.
