New kid on the pubco block
Tenanted and leased (T&L) pubs have not been considered the sexy side of the market for some time, and the ‘bottom ends’ of the big pubcos’ estates have been among the most unloved and underinvested properties in the sector.
But one man’s trash is another man’s treasure, as they say. Someone has spotted the potential in reviving these unloved inns through investment and a closer relationship with landlords. And so, from last week’s private equity-funded acquisition of 275 Greene King houses, Hawthorn Leisure was born.
The company says it will reject the “old cookie cutter tenanted pubco model” and work with tenants to identify the best way to unlock their pubs’ potential — spending money, care and attention on each site on a case-by-case basis.
The “cautious optimism” expressed by Hawthorn’s backers, May Capital, is a welcome additional vote of confidence in community pubs, after Cerberus’ recent acquisition of Admiral Taverns.
Top 20 team
In terms of pub numbers, Hawthorn is a new entry straight into the top 20 list of tenanted pubcos at 14th, in between Shepherd Neame (297) and Fuller’s (209). But if its growth plans are realised, it will quickly overtake Thwaites (317), Spirit (451), Trust Inns (515) etc and could rival the likes of Admiral (956), and perhaps overtake Greene King itself, which now intends to reduce the size of its T&L estate to 750 — to become a top 5 operator.
Hawthorn will have plenty of scope to add to its portfolio by hoovering up disposals from the big boys and some banks, who remain sellers of non-core assets in search of keen buyers.
With the sort of market position Hawthorn could quickly establish — especially as a non-brewing pubco — the company will inevitably come under scrutiny regarding its tenant relationships and ties. Anything over 500 T&L pubs would bring it into the scope of a potential statutory code of conduct, if we ever see one.
The former Greene King tenants and lessees redirecting their rent and product payments to Hawthorn’s accounts department will face the immediate prospect of establishing new relationships with new business development managers (BDMs), and will no doubt have many questions about their future.
Right noises
But the company is making all the right noises. CEO Gerry Carroll — a former MD of Enterprise Inns and Little Chef — said: “There is a fantastic opportunity to work hand in hand with tenants, who we see as our genuine partners, backing them with management support, advice and investment.” He has vowed to recruit a high-calibre team and run with an industry-leading ratio of one BDM to every 35 pubs.
But promises are cheap, and actions speak louder than words. We wish Hawthorn and its pub partners well, and will follow their progress with great interest.
