Australia’s beleaguered pub industry has been rocked by the closure of another iconic pub, with the 170-year-old Cauliflower Hotel in inner Sydney collapsing into receivership. BankWest, now owned by the Commonwealth Bank, appointed receivers to Cauliflower Hotel Pty Ltd yesterday. It has been reported in the Sydney Morning Herald that the hotel had a loan facility of $15 million.
The pubs sector across Australia has been hit by a combination of falling revenue as a result of the downturn, falling asset values and high debt. The poor performance of many pub operators has led to many banks fleeing the sector.
In the last 12 months, high profiled groups including Cornerstone Hotels and Mark Alexander-Erber’s Pubboy empire have collapsed, while the share prices of listed pub operators such as National Leisure and Gaming and Hedley Leisure and Gaming Fund have been decimated.
According to a report in the Sydney Morning Herald, more than 200 hotels across New South Wales are in breach of their banking covenants.
The paper says Tankstream Pub and Leisure Group, which is trying to raise money through a managed investment scheme, revealed in the prospectus for the scheme that its four NSW pubs had breached their covenants on a $14 million loan from National Australia Bank after their earnings fell nearly 20% below budget in the three months to the end of March.
One pub industry veteran says a lot of the current turmoil is the result of a flurry of pub trading in 2005 and 2006.
“There was a lot of buying and selling of pubs at very inflated prices and that’s coming home to roost.”
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
Comments