A YEAR PUBLICANS MIGHT WANT TO FORGET
Both examinerships and receiverships were two-a-penny in Dublin’s struggling pub trade during 2009
For the Dublin licensed property market, 2009 will be remembered as the year of the examiner and the receiver, with many notable pub groups succumbing to the economic pressures which are now rampant throughout the industry. On top of this, the lack of bank debt finance compounded an already difficult situation for the licensed trade, with the result that there were very few pub sale transactions to record during the year.
It was widely anticipated that 2009 would be extremely challenging for the licensed trade, but no one quite foresaw just how difficult trading conditions would be. The idea that pubs would be clamouring for business and offering heavily discounted drink prices to attract customers seemed to go against the grain of what ‘‘normally’’ happens in the bar trade in a recession.
There were many high-profile examinerships and receiverships throughout the year.
The examinership of the Thomas Read Group, which owns many well-located city centre bars such as the Bailey, Searson’s, the Globe and Ron Blacks, continued during the earlier part of the year.
However, the shareholders ultimately failed to find a scheme of arrangement that was satisfactory to its creditors, and as a result the group was placed in receivership. The receiver, Martin Ferris, offered all of the leasehold interests of the group for sale by private treaty but, as we approach the end of the year, deals for the sale of these leasehold interests have yet to be confirmed or concluded.
Another casualty of the crisis in the Dublin licensed trade was the fashionable Cocoon Bar on Royal Hibernian Way, owned by ex-Formula One driver Eddie Irvine, which closed its doors. The popular Renards bar and nightclub, owned by Robbie Fox, went into liquidation, while one of Dublin’s largest pub and hotel groups, Capital Bars, appointed an examiner to four of its pub properties - Cafe¤ en Seine, the George, Howl at the Moon and Zanzibar.
One publican who successfully weathered the examinership process was Paddy O’Reilly, owner of the Roselawn Inn in Castleknock and the Courtyard Bar in Navan.
A scheme of arrangement was successfully put in place to save both premises from going into receivership, allowing them to continue trading.
Most of the premises offered for sale throughout the year were on the instructions of receivers. The well-known Globe/Rí Rá nightclub premises on South Great George’s Street (part of the Thomas Read Group) attracted considerable interest from a wide range of interested parties, with a preferred bidder eventually emerging from the competitive bidding process.
The Madison in Rathmines and the Towers in Ballymun were two other pubs which were offered for sale during the year as a result of receiverships.
It took nearly five months for the first significant pub sale of the year to be recorded, with the announcement that Smyth’s in Malahide, Co Dublin, had changed hands in a quiet, off-market deal for a price believed to be in the region of €7 million. The property was sold by well-known publican Noel Smyth and acquired by former Licensed Vintners Association chairman Derek Fowler.
But one sparrow does not make a summer, and one pub sale did not dispel the blues that the licensed property market was experiencing. Due to a complete lack of debt financing, many publicans believed it was pointless either to place their properties on the market or to seek funds to purchase another outlet. Indeed, even sourcing adequate funding to complete a bar refurbishment proved to be extraordinarily difficult.
As a result, confidence in the sector remained very low. For many, the tough trading conditions deteriorated further during the summer months, reflecting the serious downturn in the economy as a whole, with many people losing their jobs or enduring substantial pay cuts.
As a result, disposable discretionary spending was severely constrained, and this had an immediate impact on drink sales. On-trade volumes continued to decline rapidly, and there was a notable shift to off-sales, much of which migrated to Northern Ireland.
In a recent report by the Drinks Industry Group of Ireland, 70 per cent of licensed premises surveyed throughout Ireland reported a fall in sales over the past five years which had accelerated sharply in recent months. The report paints a dark picture for the pub industry countrywide, and believes that closures of nonviable pub premises will rise rapidly in the coming years.
With a downturn in drink sales, many publicans focused sharply on the costs of running their premises, reducing overheads (including staff members) where at all possible, while at the same time increasing the attractiveness of their premises either through a greater food offering or by other event-led initiatives.
Many well-run pubs have adapted to fast-changing consumer demands and patterns, with the result that the current economic downturn has had less impact than on those who failed to enhance or alter their business model. As can often happen in such a situation, some well-run, well-managed and well-organised licensed premises continue to trade satisfactorily, while others are feeling the impact of changing consumer sentiment far more severely.
One publican who continued to invest heavily in the industry was Michael Wright of the Wright Group, who opened a new nightclub venue in Airside near Swords with a capacity for 2,700 people after major capital investment.
The final analysis for the Dublin licensed property market for 2009 will show that just three freehold properties changed hands throughout the year: Smyth’s of Malahide, the Madison in Rathmines and the Forty Foot in Dun Laoghaire.
This level of sales activity (or inactivity) is unprecedented, and reflects the stark fact that licensed premises are continuing to suffer significant falls in revenue due to a combination of factors such as tougher drink-driving laws, the smoking ban and, most importantly, the shift towards drinking at home.
Demonstrating the stark deterioration in pubs changing hands, the capital value of the market in 2009 was approximately €12 million, down from €35 million in 2008, €110 million in 2007 and €190 million in 2006 when the market was at its peak.
This year has undoubtedly been one of the toughest in the history of the pub trade and, looking forward, 2010 is unlikely to be significantly better.
The rollout of Nama and its impact on bank funding will be eagerly awaited.
This article appeared in the Sunday Business Post printed edition, 29th November 2009.
For Further Information please contact.
John Ryan, Director Hotelks & Licensed, CBRE
t: + 353 1 6185500