Dixon Hospitality emerges as preferred bidder for seven Keystone assets

Dixon Hospitality has emerged as the preferred bidder for seven of the Keystone Group assets, including the Cargo Bar and Kingsleys steak house, which will give it increased exposure to the Sydney pub and food and beverage market.

If successful, Dixon will use the assets to prepare its portfolio for a possible float, which is said to be worth about $310 million and could hit investors' mail boxes in time for Christmas.

Under the Keystone recovery plan, receiver Morgan Kelly will sell Dixon the leaseholds over the Cargo Bar, Bungalow 8, The Rook and Winery in Darlinghurst, Manly Wine, Chophouse Sydney and popular steak place, Kingsleys Woolloomooloo.

The remaining assets - Kingsleys Brisbane, Chophouse Brisbane and the Jamie's Italian chain across the country - are being sold separately and have attracted the interest of a number of individual buyers.

Under the Keystone recovery plan, the receiver will sell the leaseholds over assets including the Cargo Bar at King Street Wharf in Sydney.Credit: Janie Barrett

CBRE Hotels have been managing the sale, during which it became clear that prospective buyers were most interested in specific venues that strategically aligned with their own businesses.

Keystone group was placed into receivership on June 26 by a syndicate of lenders, KKR and Olympus Capital, after failing to reach agreement with the board on key aspects of its financial structure.

Keystone borrowed $80 million in mezzanine debt but was unable to repay on the due date. The cash was used to build and upgrade the 17 assets which are gastro pubs and food and beverage specialists.

In a short statement late on Monday, Mr Kelly said as part of the remaining due diligence process, Dixon Group representatives would this week start meetings with management of the venues.

Kingsleys Woolloomooloo is among the assets Dixon is hoping to buy.Credit: Louie Douvis

"Other shortlisted parties have been advised of the selection of the Dixon Group as preferred bidder at this stage," Mr Kelly said.

"We are also in final stage negotiations with separate bidders for the sale of the remaining venues.

"The decision to separate the Keystone Group assets for sale was taken to maximise sale proceeds. The businesses are all continuing to operate on a business as usual basis."

Dixon Hospitality Group, led by Michael Dixon, the son of former Spotless chief Bruce Dixon, has been boosting its portfolio with a range of assets.

Since last year, it has bought 16 venues from the Open Door Pub Company and nine from the Melbourne Venue Company. It also bought three inner-city Sydney pubs from the Drinkndine group earlier this year and paid $31 million for the Beer DeLuxe Group in August.

It now owns about 40 pubs, hotels and restaurants, including 505 Wine Room in Toorak, the College Lawn Hotel in Prahran, the Imperial Hotel in Bourke St, Melbourne, Tap House at Sydney Airport and the Oxford Tavern in Sydney's Petersham.

It comes as the national pub market is on a roll, with new and traditional operators buying up assets and converting them into new food-focused venues.

The Sydney suburbs are in their sights as operators skirt the city's lock-out laws. Sydney pub tsar Justin Hemmes has led the charge with the revamp of the Coogee Pavilion in the east and the Newport Arms on the northern beaches.

About $300 millon of pub assets have changed hands in the past two years, most recently the popular Commodore hotel in North Sydney for $14.5 million through Ray White Hotel's national director, Andrew Jolliffe.