Punch Taverns sells 158 pubs to retail REIT in £53m deal
STAFFORDSHIRE pubco Punch Taverns is to sell 158 of its non-core estate pubs to retail REIT NewRiver in a deal worth £53.5m.
The deal is very similar to NewRiver’s purchase of 202 former pubs from Wolverhampton-based pubco and brewer Marston’s in December 2013 in a deal worth £90m.
Burton-upon-Trent-based Punch said the deal 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 September 11, 2015. The transaction will be paid in cash and Punch said the proceeds would 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, Punch’s core estate will comprise c.2, 900 pubs and the non-core estate will have c.550 pubs.
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.
Duncan Garrood, CEO, 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 said the deal equates to a net initial yield of 13.61%. The projected annual pre-tax profit of the portfolio is around £6m million, which will generate a cash on cash equity return in excess of 20%.
It said the acquisition was in line with the company’s proven business model of acquiring strategically selected property assets that offer high cash on equity returns and present opportunities to create capital growth.
Following completion of the acquisition, NewRiver’s pub portfolio will account for around 15% of its total assets under management, which will total nearly £1bn.
The pubs are spread across the UK, predominantly located throughout England, with 34% of sites in the South East and South West. The pubs are 99.4% let and effectively 100% let for the last four years. The revenue arrears are negligible and beer volumes have increased by 2.24% per annum, compound, over the last four years.
