Staff, suppliers and lenders are increasingly on edge over the future of the Jon Adgemis pub empire, as parts of it start to collapse and reports surface of his bills not being paid.
Some of those who have the most to lose from the unravelling of Mr Adgemis’s Public Hospitality Group are members of eastern Sydney’s elite, who have invested millions into one of his key lenders, GEMI Capital.
DataRoom understands that the face value of loans from GEMI Capital to Mr Adgemis were in the order of about $200m.
The private credit provider is backed by executive director Justin Epstein and has lent more than $3bn across the broader market since its launch.
The face value of the senior loans by lenders provided to Mr Adgemis were believed to be in the order of $425m and mezzanine debt was $100m, but that was before hefty interest payments started falling due.
The interest repayments are reported to have been as high as 12 per cent, and in some cases up to 18 per cent.
Sources say it takes the face value of the debt across his portfolio of what was 22 pubs to well north of $600m.
Senior debt was initially owned by Macquarie, but Deutsche Bank now controls 75 per cent and Muzinich largely the remainder, gaining the loans for what clearly appears to be at a discount price.
Archibald Capital is also a lender.
A spokesman for Mr Adgemis’s Public Hospitality said the company has been paying staff and suppliers as new facilities become available as part of its refinancing through June.
“We have made significant supplier payments this month and working through making further supplier payments as facilities become available over the coming weeks,” the spokesman said.
Mr Adgemis is up against time after DataRoom reported that entities behind two Sydney hotel developments – The Rose Hotel development on Oxford Street and the Kurrajong Hotel in Erskinville – have now been placed in receivership.
Working as the receiver is Ankura and the move comes after at least one third-tier lender was understood to be owed tens of millions of dollars.
Only days ago, it emerged the Greek hotel Alpha in central Sydney slipped from out of his grip and is no longer part of his overall operations.
Meanwhile, lending sources say a key concern is that a major restructure of his business from a debt perspective looks increasingly likely to unravel after restructure plans have been in the wings for over a year.
Mr Adgemis had his assets owned in separate company structures with different lenders in each, although his main financiers were common lenders across the various entities.
The plan has been to create one major structure where all the assets were held, and the debt pile would be reduced to about $400m.
However, some small lenders have not been part of the major restructure plan and have started calling in their loans, where various pub assets have been the security, trigging a situation where they take control or the assets need to be sold to pay them.
This means that the assets major lenders can draw from in the larger and newly restructured company would be reduced.
It also creates a situation where the original terms of the deal would be largely different and many may not agree.
Meanwhile, the price that Mr Adgemis sells his pubs for would likely be substantially less than what he paid for them.
Dream unravels
The good-natured KPMG dealmaker turned publican with grand plans to build a thriving pub business started buying hotels from 2020.
The plan was to take on Justin Hemmes in the hotel business, creating refurbished venues in trendy locations in a business that would ultimately be floated on the Australian Securities Exchange.
Alex Waislitz through his Thorney Investment Group has been among his financial backers.
The pub market peaked in 2021 and 2022 in the period he was acquiring on the back of low interest rates and a Covid-19 recovery, and the property yields that assets were selling at were as low as 4 per cent.
Now they have almost doubled to around 7 to 8 per cent with higher interest rates and weaker consumer sentiment.
Some of his assets are in the middle of a redevelopment, and should his lenders opt to call in the loans, the financiers would likely fund the development projects before placing them on the market to recoup money owed.
Some of the financing was being targeted towards the completion of hotel redevelopments, including that of his Noah’s Backpackers site in Sydney’s Bondi that Mr Adgemis purchased in June 2022 for $68m.
Also subject to a rebuild has been his Vine Hotel in Collingwood and the Town Hall property in Sydney’s Balmain.
His Empire Hotel in Annandale was briefly on the market in a move enforced by lenders before it was swiftly removed from sale.
The Rose complex in Paddington was being created from the acquisition of The Arts Hotel, which he has since partly refurbished, and Three Weeds hotels adjoining each other.
The Kurrajong Hotel has been subject to renovation for a couple of years.
Pub market experts say also recently affecting pub property prices has been uncertainty around laws for slot machines.
However, the pubs of Mr Adgemis were mostly gastro pubs without slot machines.
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