NLG receivers to sell 20 pub leases

Leases for 20 pubs that form part of Redcape’s property portfolio are to be sold in February by the receivers of failed pub owner National Leisure and Gaming (NLG).

NLG is Redcape’s major tenant, contributing approximately 38.7% of the annual rent received by the trust.

Three of the leases are for pubs that ranked in the top 10 for gaming turnover in NSW last year – the El Cortez in Wakeley and the Eastwood and Cabramatta Club hotels – The Australian reported. Most of the leases are in Queensland and New South Wales.

The 20 leases were valued at between $70 million and $80 million when the Laundy Hotel Group bid for them earlier this year, but they have declined in value due to NLG being placed in receivership in October owing its lenders $580 million.

Redcape is currently in discussions with an investor group comprising affiliates of York Capital Management, Värde Partners, Inc. and Goldman Sachs to negotiate a recapitalisation proposal.  The exclusivity period for the discussions expires on November 28.

Since July, the consortium has been frustrated in its attempts to secure control of Redcape via a $635 million recapitalisation proposal launched in July.

The proposal was rejected by junior lenders to Redcape as being at too great a discount.

Redcape has a property portfolio comprised of 82 properties including 71 pubs and 11 shops based mainly in Queensland and NSW, with a small number of properties in Victoria and SA.

In May the consortium bought 38% of Redcape's $645 million worth of secured senior debt for around $200m and also acquired all of the $157 m worth of debt of National Leisure and Gaming, Redcape’s major tenant for between $ 35m and $40m.

More than half (45) of RedCape’s properties are leased to Coles.

The listed pub sector was battered during the GFC and according to industry sources quoted in the Australian Financial Review is “massively over rented” (meaning pubs are currently rented above their estimated market rental value), due to the rapid expansion of the corporate leasehold market in the mid-2000s when financing was cheaply available.

Earlier this month, he management rights of ING Real Estate Entertainment Fund (ING REEF) were transferred to a New Zealand fund manager.

The ING investment trust, comprising 22 pubs and 15 clubs, which are worth around $235 million, will be managed by Bodiam RE Ltd a subsidiary of the Torchlight Group for “nil consideration”, The Australian reported.

Torchlight is a subsidiary of New Zealand-based pub owner Payne Gould, which has a 17% stake ING REEF.

ING management had been hoping to sell the management rights for $2 million to $3 million.