A year of recovery

Osborne King’s Mark Carron says that a surge in appetite among buyers met the increased availability of finance in 2015 to create ideal conditions for recovery in the licensed property market here.

The licensed and leisure market has continued to see further improvement during the last 12 months aided by the return of buyer confidence, but more importantly, the availability of finance for the right project.

We have seen significant activity with many licensed premises changing hands, however the hotel sector has been more prevalent in the headlines during the last 12 months.  At least nine hotels have been sold either with vacant possession or as investment opportunities totalling more than £62m-worth of sales.  Belfast sales included The Clayton, The Fitzwilliam, Ten Square and the Crescent Townhouse, as well as two north coast hotels, The Ramada and The York Inn, and The Lough Erne in Co Fermanagh.

We expect to see continued hotel activity over the next few years with proposed developments in Belfast: the Hastings Group’s Grand Central Hotel, which will provide 200 bedrooms, Beannchor Group’s 58-bedroom Bullitt Hotel, McAleer and Rushe’s, Tomb Street and Black Staff Square Hotel projects and the Harbour Commissioners’ City Quays hotel development.

This plethora of new build developments, planned refurbishments and extensions elsewhere throughout the city will see an additional 2,200 new or refurbished hotel bedrooms come to the market.  The total number of hotel rooms for the year end December 2014 in Northern Ireland was just under 8,000 (Source: Tourism NI) for five-star down to ungraded accommodation.  Clearly all of these projects will provide much-needed employment throughout the construction sector and wider economy and along with the expansion of the Belfast Waterfront to provide larger conference facilities, should lead to inward investment from GB, RoI and beyond.

Around 20 pubs were sold last year.  Sales included The Clarendon Bar (currently under refurbishment), Granny Annie’s (formerly Bound for Boston) and Beckett’s Bar, all in Derry city.  Belfast sales included The House at Stranmillis, The Bar with No Name, The Longfellow and Village Inn.

In addition, The Botanic Inn, Madison’s and King’s Head are likely to complete and transfer ownership in early 2016. I understand, at the time of writing, that these three outlets have been sold to three separate parties at sale prices below their guide prices apart from the King’s Head.  Madison’s went to a second round of offers in order to stimulate a sale, which I understand is well below the guide price of £2.3m.   The Northern Whig will remain under the control of the Horatio Group.

Beyond Belfast, a number of pub sales have occurred including The Horseshoe Bar, Newtownhamilton; Mallard Bar, Ballinamallard and The Spirit Store in Trillick.  Previously, we saw the closure of weaker outlets, however, this trend is now slowing down.  Overall, £8m-worth of pub sales have completed during the past year.

One of the most controversial issues heading into the start of 2015 was the rating revaluation which left approximately 50 per cent of outlets with an increased rates bill.  As preferred service providers to Hospitality Ulster, Osborne King’s licensed team has undertaken numerous successful appeals on behalf of clients.  Whilst publicans and hoteliers may be still dealing with an increase in their rating outlay, most have had to accept the inevitable.

Land & Property Services has been surprised at the reduced levels of appeal, therefore, it is worth checking with a rating expert to make sure that you are not paying too much.  In addition, it is worth noting that should you wish to make an appeal, this should be lodged prior to the end of this financial year on March 31 to recover any rebate from April 1 last year.  Any appeals submitted from April 1 this year will limit any rebate to only include the period commencing April 2016 and not prior to this date.

Going into 2016, the economy will continue to grow and I expect to see the licensed and leisure market continuing to improve.  At the time of writing I am aware of eight pubs that are agreed for sale in the local market, which will equate to around £10m of sales should all complete.  This includes The Botanic Inn, The King’s Head and Madison’s Hotel.

The value of liquor licences has continued to improve, rising by 10 per cent in the last 12 months and currently standing at £80,000 for a valid and subsisting licence.  Demand for licences is steady and comes primarily from convenience store operators seeking to enhance and maintain footfall to their existing business and offering.  Depending on the application, a purchaser will require an option period of usually 12 to 18 months so a seller will need to be prepared to maintain their trade until a successful application can be concluded.

Most significantly, we should continue to see a decline in bank/administration-led sales with the return of ‘willing’ sellers and buyers supported by more favourable finance terms.  This year will see the introduction of the national living wage and this will undoubtedly have a substantial impact on the hospitality sector, which, in turn, is likely to be passed onto the consumer.  With staff overheads for most outlets equating to around one-third of turnover, this new measure will do little to improve profitability and in some cases, may lead to some hotels, pubs and restaurants closing.

On a positive note, after a difficult few years, we are now generally seeing enhanced confidence from operators, improved lending conditions and stronger buyer appetite, all of which have ultimately improved values during 2015.  I expect to see further improvement during the next 12 months as operators continue to invest in enhancing their outlets – hopefully there will be a significant number of transactions!

Mark Carron MRICS is a director and works with the licensing team at Osborne King in Belfast. He can be contacted on 028 90270016 or email mark.carron@osborneking.com