Pub deal off as Adgemis’ debt reset talks grind on

The jockeying of lenders around pub baron Jon Adgemis’ complicated debt rescue has seen the watering hole in Sydney’s inner west pulled from sale.

Ex-banker, now-property mogul Jon Adgemis. Picture: David Swift

The looming sale of Sydney pub baron Jon Adgemis’ Empire Hotel in Annandale has been pulled after lenders on the $40m hotel pulled back from flogging the three floor block on the open market.

This comes as Mr Adgemis is hammering into shape the rescue plan for his network of 22 pubs, hotels and restaurants, which are labouring under a $500m debt load.

Savills sales agents were told in recent days the Empire Hotel would be withdrawn from the market amid expectations the 21-room, three floor venue would snag up to $40m on the open market.

This comes after lenders stepped in to tip the hotel into auction, amid dispute over the almost $38m debt pile on the pub.

This debt is split between Archibald Capital and lenders Gemi Investments.

Mr Adgemis picked up the Empire Hotel in 2021 in a $20m deal as the pub baron assembled his portfolio — worth an estimated $700m amid a hot hotel market.

A spokesman for Mr Adgemis’ Public Hospitality Group, which owns and operates the 17 functioning venues, and is rebuilding a further six sites, confirmed the Empire Hotel had been withdrawn from sale.

He said the pub would now form “part of PHG debt reset discussions,” noting the negotiations between a coterie of lenders is “progressing well”.

Empire Hotel, Annandale

The late move comes as Mr Adgemis seeks to hammer out a $500m debt deal across his pubs and hotels, which are currently each funded by a swath of different lenders across both the operating assets and the underlying properties.

Debt repayments for PHG are hovering around 12 per cent, with negotiations aimed to bring down the tempo of the debts and eliminate mezzanine financing, with interest topping 18 per cent.

The rapid run up in interest rates, coupled with multiple concurrent renovations across several cornerstone assets, including Noah’s backpackers in Bondi, has left PHG facing a blowout in costs.

Mr Adgemis had sought to lock in Bain Capital to refinance the group, but the private equity players walked away from the debt deal after failing to secure a $2.5m upfront payment from the pub baron.

But, some industry players suggested Bain Capital had come back to the table with a discounted offer — reported to be about 50 cents in the dollar on debts in the pub empire — which may be taken up by some lenders.

“It’s looking less likely that there’s some orderly process here,” one source said.

Industry experts said they were not concerned about the fallout for the wider pub industry as the problems are specific to PHG.

PHG is now locked in negotiations with current lenders, with those close to the deal signalling Mr Adgemis’ side, which is backed by his two biggest funders Deutsche Bank and private lenders Gemi Investments, are seeking to renegotiate debts across multiple assets.

Some assets will form part of the “debt reset” being marketed by Mr Adgemis, with pubs and hotels across the group being divvied up into core and non core assets.

Noah’s Backpackers, 2-12 Campbell Pde, Bondi Beach. NSW Real Estate.

Lenders Angas Securities swooped on a $25m Bondi block last week after turning down two offers from Deutsche Bank sources indicated could have seen the group recoup its initial lending, but walk away from interest accrued on the property since 2022.

Lenders Millbrook are also seeking to sell Mr Adgemis’ Manor House pub in Sydney’s Darlinghurst, which sits outside PHG, but the lender signalled it remained “very supportive” and engaged in Mr Adgemis’ “debt reset”.

A Milbrook spokeswoman said the group’s “priority is the protection of our investor’s capital, and has enforced its security in order to do so”.

“The Manor House is a boutique hotel, which is outside of the scope of the debt reset,” she said.

“Millbrook remains focused on the protection and preservation of investor capital, and has enforced its security over this asset in order to protect our investors position.”

Originally published as Pub deal off as Adgemis’ debt reset talks grind on