IMPROVEMENT IN LICENSED MARKET EXPECTED TO CONTINUE DURING 2015
15 January 2015The licensed and leisure sector continued to perform reasonably well in terms of transactional activity and although the volume of deals was on a reduced scale, more significantly, there were fewer distressed sales during 2014.
The year got off to a bumpy start following the temporary closure of the Crown Bar as the result of an “administrative oversight” whereby the tenants had failed to renew their liquor licence in 2012. Although the pub was closed for only a weekend it highlighted a more general problem namely that some licensed outlets were failing to renew their licences on the required five- yearly cycle with the next rotation due to occur in 2017. A number of outlets throughout the province were affected leading to some pub closures and in some cases obliging the publican to secure a new licence before they could re-open which was clearly a hefty price to pay.
During the past twelve months, demand for liquor licences during has grown significantly with supply waning dramatically. Typically, we would have a stock of approximately four to six licences for sale; currently we only two available due to the increased demand during the year. In terms of value a licence could have been acquired for £50,000 at the start of the year. and at present we are guiding pricing for valid and subsiding licences at the £75,000 mark. Looking ahead to 2015, we expect that the value of and demand for licences will remain buoyant due to the limited supply and constant demand from primarily convenience store operators followed by new public houses.
Although as stated earlier, the volume of transactions has been down on the previous year, the transacted value has been substantial. The demand for decent licensed premises remains strong in Belfast and Derry however the acquisition of premises, particularly in the former city, continues to be challenging due to restricted supply. Belfast will continue to attract the majority of the province’s weekend revellers who are lured by the quality and variety of licensed outlets throughout the city centre notably the Cathedral Quarter and Shaftesbury Square district.
During 2014, a number of substantial hotel transactions were completed including the 5 Star Lough Erne Hotel in Co Fermanagh, which after many years in administration was sold to an American investor for less than the £10 million price tag. Other hotel sales included the 93-bedroom Towers Hotel in Derry s acquired by the Dalata Hotel Group Plc for circa £4.375m which also owns the hotel at the International Airport. The company has been very active during the year snapping up opportunities in the Republic also. Another notable hotel sale which is pending is the Ramada Hotel, Portrush which has been agreed for a figure exceeding its asking price of £2.75m.
The pub sales in which we were involved during the year were concentrated mainly in provincial towns and included the sale of Wine & Co, Holywood, Harry’s Bar, Banbridge, Three Flowers, Derry and the Phoenix Bar in Newry to name but a few. Finally a number of nightclubs also changed hands during 2014, the most noteworthy of which was the Kremlin in Belfast city centre, which was acquired by the tenant for close to £3m and The Fly, also in Belfast. Meanwhile, Osborne King handled the sale of another well-known nightspot, The Coach in Banbridge.
One of the main talking points in 2015 for many will be the rating revaluation due to take effect on the 1st April which will see many licensed operators having to budget for a substantial monthly increase in their outgoings. Clearly operators should be taking appropriate advice to make sure that the rates assessment applied to their premises is appropriate for their business turnover as at 1st April 2013. Other recent legislative initiatives included the passing of the Licensing of Pavement Cafes (NI) Act 2014 which should roll out in 2015 for this currently unregulated practice, while the Minister for Social Development has also announced the introduction of restricted additional opening hours for certain licensed premises on twelve occasions throughout the year and extended Easter opening hours.
Looking forward to 2015 we will see continued normalisation of the property market generally with more consensual licensed sales as opposed to forced or distressed sales. Licensed operators are likely to seek to enhance and re-energise their premises through the refurbishment of tired décor with a view to increasing and protecting their market share. We also anticipate that chains such as Wetherspoons will continue to try to increase their expansion within the local market especially in the light of their acquisition of former church premises on University Road much as they are doing in the Republic.
Generally speaking, we expect to see continued improvement within the licensed trade characterised by a growth in turnover and an increase in demand for decent outlets. We also foresee rising capital values for outlets and licenses fuelled by lack of product and improving economic conditions.