The Lion Hotel is the seed of an ambition to grow a new ASX-listed company based in Adelaide
The trio who bought the Lion Hotel have plans to acquire up to 15 more of them in the next year and eventually list their fund on the share market.
SA Business
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While the reopening of the Lion Hotel is a welcome milestone on the State’s road to economic recovery, it also marks the launch of a new multimillion-dollar pub investment fund with ambitions to eventually list on the share market.
Duxton Asset Management founder Ed Peter - also the owner of pubs such as the Crafers Hotel and the Uraidla Hotel, teamed up with Martin Palmer and Brett Matthews to buy the Lion, which will be the cornerstone asset in a fund worth an initial $40 million.
About $25 million in new capital will be raised from sophisticated investors, with the money to be used to buy as many as 10-15 pubs across metropolitan and regional South Australia over the next year. The longer-term ambition is to be a top three pub owner nationally.
Due diligence is currently being carried out on about seven possible acquisitions, Mr Peter said.
The trio, who have deep industry knowledge through the 19 venues they own already, identified that the pub ownership sector was very fragmented in Australia, and there would be synergies across areas such as purchasing, staff and marketing from building a critical mass of assets.
“You start sharing your chefs, your staffing, your purchasing,’’ Mr Peter said.
“We are looking to build long-term relationships with suppliers so people can count on us.
“Then we don’t have to charge more for better quality, our customers get a better price, we get a fair price and our suppliers get a fair price.
“Our advantage is that quality edge.’’
The fund will look to purchase freehold and leasehold pubs and will focus on the SA market, which includes about 620 venues.
“At this point there’s no reason to leave SA,’’ Mr Peter said.
“And we’re mostly focused on SA investors. The goal is to IPO within four years.’’
Mr Peter said he believed the fund would be attractive to investors because there weren’t many options to get access to this sort of asset, and they were a good contrarian asset to hold.
“If we’re correct on ow we see the economy, these will do very well.
“Pubs tend to trade reasonably well in a recession, they tend to trade reasonably well if we get an inflationary environment, and they tend to pay off really good dividends.
“The target dividend for the short financial year is seven per cent (to the end of this financial year).’’
Mr Peter said for a full financial year the dividend could be as much as 9-11 per cent.
The funds raised would be used to buy venues, which would be sensitively refurbished.
“They’re all going to have their own soul,’’ Mr Peter said.
“Pubs have their own sense of what they have been, and what they want to be. We celebrate that.’’
Duxton has a suite of listed and unlisted investments, including listed companies Duxton Water and Duxton Broadacre Farms. Investment details can be sourced from the Duxton website.