independent

Thursday 17 April 2014

Green shoots in pub trade

The sale of Tramco, a former Days Hotel in Rathmines, Dublin 6, for around €2.5m on Christmas week reflects a more optimistic outlook for the pub and hotel trade in 2013. The agents Morrisseys also have agreed sale terms for four other licensed premises in recent weeks and are hopeful of completing these deals in the coming months.

Director Bill Morrissey says he expects that prices are also likely to stabilise for those business that enjoy a sustainable trade. A number of purchasers, with both their own funding and funding from financial institutions, have begun to look for quality businesses in key trading locations throughout Dublin. "This augurs well for the market place by way of valuation and confidence," he adds.

In 2012, 12 licensed premises changed hands in Dublin for €9.64m and the average sales price increased from €790,000 to €800,000. While the number of deals was up on 2011, the level of activity at 1.55pc of the total pub population is well below the 10-year average of 2.41pc and the market peak at 4.77pc.

Prices paid on the basis of multiples of net turnover are down from 1.75 to 3.0 times those turnovers in 2008 and 2009 to 0.5 times to 1.5 times net turnover last year.

The latter multiples are now being achieved where the property is in good repair, enjoys consistent trade and is reasonably profitable. On the other hand, higher multiples are being achieved for pubs with growth potential, and that have a considerable volume of trade with economies of scale and profits that are in the top tier of the pub market.

One of the deals in 2012 was a lease with purchase option and Mr Morrissey expects this type of transaction to remain a feature of the market until banks resume normal lending levels to purchasers.

Such lease options require prospective purchasers to pay about 25 to 30pc of the price as a deposit with the remainder being phased over three years, with the lease paying so much money over the period that they are unlikely to withdraw from the purchase.

Other notable sales by the firm during the year include The Purty Kitchen businesses in Dun Laoghaire and Temple Bar. The latter was bought by a member of the McGowan publican family of Phibsboro for a sum believed to be over €2.2m.

Meanwhile, the Sheaf O' Wheat pub in Coolock, Dublin 5, sold for around €400,000. Its relatively low price reflects extensive fire damage.

A slight fall in the values of pub licences saw them selling for around €65,000 – almost one-third of the €180,000 that these achieved when property developers were competing for them for new pubs and hotels.

Now it's mainly retailers who are buying them for off-licence trade.

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