05/12/2007 - 22:00

Pub buy-up a $190m economic play

05/12/2007 - 22:00

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Pub buy-up a $190m economic play

Sydney-based company, Compass Hotel Group Ltd, is forecasting strong revenue growth across a swath of high profile Western Australian pubs it plans to buy as part of a $190 million stock market listing.

The group, which will most likely become the biggest pub operator in the state, has signalled the hospitality expertise of its management, as well as synergies obtained from owning 12 hotel and tavern properties in buoyant Western Australia, as the keys for its bullish revenue forecasts.

One of the properties, the Albion Hotel in Cottesloe, is forecast for revenue growth of 22 per cent this financial year – a growth rate it expects to repeat the following year.

At the 10,339 square metre site of the Carine Glades Tavern in Duncraig, revenue is expected to jump 21 per cent this year and 12 per cent the year after.

At the Brighton Hotel in Mandurah, revenue is predicted to increase 17 per cent this financial year and 12 per cent the next.

Compass lodged a prospectus last week to raise $123 million for the project. The prospectus is for a stapled security comprising a share in the company and a unit in Compass Hotel Group Trust.

While the directors and management team have little known connection to WA, some of those behind the responsible entity for the trust, Primary Securities Ltd, have been prominent in local business circles.

Best known is undoubtedly Robert Garton Smith, a Fremantle based commercial lawyer who has worked in the managed investment scheme sector and, prior to that, in film financing.

Mr Garton Smith is managing director of Primary Securities, which has largely played the role of responsible entity in agricultural or forestry MIS.

According to the prospectus, other Primary Securities directors are unit trust manager Anne Thoume, merchant banker and vineyard developer Tony Treadgold, and compliance specialist Brian Millmore.

In its prospectus, Compass suggests that WA is a different business proposition from the eastern states due to the lack of gaming licences and has been overlooked as a market for consolidation.

“Perth has been selected as the primary market for the initial portfolio due to the positive macroeconomic exposure to the Western Australian economy,” the company states in the prospectus.

Furthermore, Compass believes it has the skills to manage these operations in the WA non-gaming environment.

“Western Australia does not have a legislated gaming environment; therefore the majority of value is generated from these hotels via the performance of food and beverage sales,” the company says.

Among the properties named in the prospectus are the Kalamunda Hotel, which sits on a 2,020sqm site, the Belmont Hotel (2,218sqm site), the Herdsman Lake Tavern (6,555sqm), the recently refurbished Peel Alehouse (4,681sqm), Peninsula Tavern (6,587sqm) in Maylands, Balga’s Princess Road Tavern (9,697sqm), and the Gosnells Hotel (9,542sqm).

There are also two additional unnamed hotels – one a 9,509sqm site north of the Swan River and the other on a 3,928sqm property located in the southern metropolitan area.

The 12,804sqm Gosnells Railway Markets, which adjoins the Gosnells Hotel site, has also been purchased.

Most of the transactions are expected to be completed by early February.

• Additional research by Anna-Nicole Del-Re.

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