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Punch agrees £53.5m disposal to NewRiver
The company said that the agreement was consistent with its strategy to sell the non-core estate at a rate of approximately 200 pubs per year.
The disposal at an average of c.£340,000 per pub, is above book value and “significantly ahead of the average proceeds achieved for previous non-core disposals”.
The agreement is unconditional and is expected to complete on 11 September 2015. The consideration will be satisfied in cash and proceeds will be used to reduce net debt.
The disposal comprises 150 pubs from the non-core estate and eight pubs from the core estate that no longer meet Punch’s criteria as a core pub. Post transaction, the core estate will comprise c.2,900 pubs and the non-core estate will have c.550 pubs.
Punch said that the pubs being disposed generated earnings before interest and tax of £7.3m over the last twelve months and have a current book value of £52.5m.
Punch will issue a full year trading update for the financial year to 22 August 2015 on 1 September 2015.
Duncan Garrood, chief executive of Punch Taverns, said: “This transaction is in line with our stated strategy of disposing pubs within the non-core estate, reducing the overall level of our debt, whilst focusing on our higher quality core pub estate.”
NewRiver Retail acquired 202 pubs from Marston’s for £90m in 2013, with the group announcing last month that good progress had been made in converting a number to convenience stores.
Following completion, NewRiver’s pub portfolio will account for circa 15% of its total assets under management, which will total nearly £1bn.
The latest portfolio comprises 339,866sq. ft. of total internal gross area, 1,844,766 sq. ft. of total site area and 1,730 car parking spaces and has an estimated reinstatement value of £146m. 34% of sites are based in the South East and South West.
The company said that the quality and stability of the portfolio is reflected in it being 99.4% let and effectively 100% let for the last four years.
It said: “The revenue arrears are negligible and beer volumes have increased by 2.24% per annum, compound, over the last four years.
“The portfolio has significant asset management and development opportunities, including unlocking and creating capital growth through the introduction of new and complementary uses, as well as offering existing occupiers longer, more sustainable leases.
NewRiver is believed to have appointed LT Pub Management to run the day to day management of the portfolio and deliver “pre-identified efficiencies”, allowing NewRiver to focus on the asset management and development programme.
NewRiver said it had identified a number of “value-enhancing development opportunities” within the portfolio, which could include residential new builds on surplus land, extension or part-conversion of pub assets for residential use and the build of new convenience stores on surplus land.
Allan Lockhart, property director at NewRiver Retail, said: “We are delighted to announce the acquisition of the pub portfolio from Punch Taverns, which represents a strategic progression for NewRiver, following our acquisition of a similar portfolio from Marston’s in late 2013, the successful result of which has led us to identify similar opportunities.
“In many ways this portfolio is similar to our Marston’s transaction, in that we expect to deliver exceptional cash on cash returns and attractive capital growth through asset management and development. We are confident that this acquisition will add significant long term value for our shareholders.”
Last month, NewRiver said it had submitted a further six planning applications and successfully secured another three consents in regards to the Marston’s portfolio, taking the total number of planning applications submitted to 45 and total planning consents received to 13.
Sapient Corporate Finance advised Punch on the deal, while NewRiver was advised by Colliers International.
 | This story was first published by M&C Allegra Foodservice, eating and drinking out market insight. |
