Pub player serves up new venue
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Melbourne-based Australian Venue Company has bought another popular Western Australian pub only months after its purchase of The Publican Group.
The deals form part of a longer-term acquisition strategy to scale-up operations in WA.
Opened in mid-2016, East Fremantle’s Sweetwater Rooftop Bar, located at the Richmond Quarter, is the latest addition to AVC’s portfolio of leaseholds in WA, joining The Publican Group’s Guildford Hotel, The Aviary, and Wolf Lane.
AVC chief executive Paul Waterson, who recently assigned Joe Baily as Perth-based state manager, told Business News the company typically only appointed a state manager if it had a critical mass of 10 to 15 venues.
“At the moment we’re about to have our fourth, but I wouldn’t see any reason we couldn’t get to 10 to 15 pubs in WA within the next 18 months to two years,” he said.
AVC, previously Dixon Hospitality, is backed by US-based global investment firm KKR, which bought a majority stake in the Australian company mid-last year before allocating it up to $200 million to put towards acquisitions.
Mr Waterson said the funds flowed from the investor’s Asian fund, which is worth $US9.3 billion.
“So that’s not to say if greater opportunities came along we couldn’t access additional capital,” he said.
Mr Waterson said he and AVC founder and executive chairman Bruce Dixon saw the WA market as an attractive opportunity.
“We can see some consumer confidence coming back into the market and we can see some good investment in the pub industry,” he said.
AVC typically targets pubs that turn over more than $5 million, have a minimum 10-year lease, and are within five to 10 kilometres of the CBD.
“I think the really good thing about Perth is you can buy these sort of assets for about three to four times Ebitda (earnings before interest, taxes, depreciation and amortisation),” Mr Waterson said.
“Over in the east coast, particularly Melbourne and Sydney, it can be anywhere from four to five and sometimes in Sydney as high as six times earnings.”
GMO hospitality broker Murray Brown, who negotiated the sale between AVC and Sweetwater and is scouting for more sites, said Sweetwater had an impressive first year with reputed profits of more than $1 million and modest rent on a 25-year lease.
He said AVC was currently interested in four Perth hotels.
Mr Waterson said he intended to run Sweetwater as it currently operated, with a strategy to build a house of brands.
“Each pub or bar will maintain its own identity and the staff will be given a lot of autonomy over what menu they put up,” he said, with the Aviary set to undergo a nominal refurb.
Sweetwater co-owner and property developer, Russell Quinn, said he was surprised by the rapid success of the venue.
Mr Quinn largely attributed this to his bar manager at the time of opening, Ben Tua, his chef Leigh Power, (formerly of Melbourne’s Gingerboy), and his venue manager Amanda Silk, who has recently left the business.
Having owned the old shopping centre at the site, Mr Quinn developed the $87 million Richmond Quarter as part of a joint venture with Australian Finance Group.
Sweetwater was the only business Mr Quinn owned and operated within the development, with the freehold sold to a private Sydney investor late last year.
“Part of the design application (for Richmond Quarter) focused on this bar, because what we found when we were trying to get this development approved was, back in the 1950s, there was, exactly where the footprint is for Sweetwater, the old Richmond Theatre and Gardens,” Mr Quinn said.
“And then there was an existing (liquor) licence in the shopping centre, from the old Royal George, so, with that licence and knowledge of what used to be there, it seemed like a good idea at the time.”
Mr Quinn said he and his business partner, a surgeon, had no prior experience in hospitality but felt there was a need for an edgy venue in the area.
“The business wasn’t technically for sale but after seeing who Dixons were, we could see it would certainly be handing over to vastly more experienced operators, and that’s what I think the venue deserves to take it to the next level,” he said.