Press Up: Paddy McKillen jnr and Matt Ryan’s hospitality leviathan not immune to economic headwinds

Like a mythological creature rising out of a murky sea, Press Up group has come to dominate the horizon and landscape of Dublin’s bar, restaurant and hotel trade in the decade since Ireland’s economic collapse, becoming, in quick fashion, one of the biggest players on the scene.

With a portfolio of more than 100 businesses dotted across the capital, its suburbs, Cork, Galway and, increasingly, the UK, Paddy McKillen jnr and his business partner Matt Ryan have made no small amount of noise with their forays into the market, snapping up numerous properties before bending and shaping them in their identifiable style.

Through their separately managed Oakmount vehicle – which owns many of the properties in which Press Up operates – the two Dublin-based businessmen have dipped their toes into residential developments in south Dublin’s leafier postcodes.

But even a leviathan can struggle against strong currents. The Covid-19 pandemic that wiped out tourism and trade was followed by a period of soaring inflation and sharply inclining borrowing rates have posed existential threats to even the most robust businesses, particularly in the hospitality sector.

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Those issues have been brought to bear on Press Up over the past two years. Rising costs, construction delays – albeit, minor ones – and a certain amount of chopping and changing with the group’s concepts have all been part of the group’s post-pandemic story. Yet, the duo have continued to expand their reach, launching new brands, upmarket property schemes and other investments.

One story in particular provides a window into this new environment. In February, Oakmount put a portfolio of five major hotels – the Dean Dublin, the Mayson, the Devlin, the Dean Cork and the Dean Galway – up for sale with a price estimated by market sources at the time to be in the region of €250 million.

The sale followed on the heels of two previous attempts to exit from at least a portion of its investments to further fuel its breakneck expansion. Memorably, McKillen jnr and Ryan explored a stock exchange flotation in 2018 and there were parallel discussions around a private sale, neither of which came to fruition.

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More than six months later and the market is still waiting for white smoke on the transaction, despite reportedly “significant” interest in the five properties. “There was a headline price that looked very high,” said one market source. “For the amount of rooms, the price was very strong.”

The deal is, by all accounts, complex and is likely to take some time to put together. Conversations are ongoing, it is understood, and the process is very much an active one.

To some, however, the delay is emblematic of a wider malaise in the commercial property landscape right now. Valuations have fluctuated wildly since the pandemic.

While hotels have traded well this year, transactional activity in the first half was also notably weaker, given the new interest rate environment, which has sent commercial investment levels tumbling. Between April and June, the total amount spent on Irish hotels was 30 per cent lower than the long-term quarterly average, according to CBRE, with the number of deals 34 per cent behind the long-term average.

Across Europe, hotel investments fell 26 per cent in the opening quarter of 2023; faring better than the wider commercial real sector in which investment levels fell by a whopping 63 per cent, but still notably lower.

Neither has the group been immune from construction issues in the wake of the pandemic. Much to the consternation of local residents, work at Oakmount’s Pinnacle development in Mount Merrion – where it is in the process of delivering 100 luxury apartments adjacent to Press Up’s Union Cafe business – was halted for a time earlier this year.

Work has since resumed after the developers switched contractors with the project now being completed by Ronan Higham’s Belfast-based Pure Fitout, a long-time Press Up collaborator in which Matt Ryan is listed as a director.

The good news for McKillen jnr and Ryan is that they have never had trouble attracting funding and their reputation for deploying capital is well established

While the project is motoring once again, the delay was significant enough that local representatives expressed concerns to Dún Laoghaire-Rathdown County Council about the pace of delivery.

On the Press Up side of the empire, The Irish Times put a series of questions to the group about developments within the business in recent times. A spokeswoman for the group declined to comment and noted recently filed accounts for some of the group’s businesses.

Accounts filed in the past fortnight for the Workman’s Club Ltd offer a long-awaited glimpse into the group’s fortunes as it exited the pandemic. Profits at the trading entity behind a host of familiar Press Up venues – including the eponymous club on Dublin’s Wellington Quay and nearby businesses like Bison Bar, the Liquor Rooms, Angelina’s restaurant and more than 30 others dotted around Dublin – sketch a rough image of a group in bounce-back mode after the pandemic.

Turnover at the cluster of bars and restaurants surged from a relatively meagre €9.3 million in 2021 to more than €30.8 million in the year to the end of May 2022. Operating profits in turn recovered from just €2.7 million in 2021 to €3.7 million, still down from the €6.4 million recorded in the year to the end of May 2018 but trending in the right direction.

Having furloughed and laid off much of its workforce during the pandemic, staffing levels also rebounded from a paltry 198 in 2021 to more than 500, a figure that includes bar and floor staff and management. After tax, the group generated profits in excess of €3.36 million, bringing accumulated profits to north of €8.4 million.

Looking beyond the headline figures, however, reveals some of the pressure the business is under. The Press Up entity would have been trading in the red in 2022 had it not been for the more than €7 million it received in Government subsidies through the Temporary Wage Subsidy Scheme.

Administration expenses – including staff salaries – surged to almost €22.2 million from €7.1 million in 2021, eclipsing Workman’s Club’s gross profits of more than €20.5 million. Naturally, given the ramp-up in staffing, wages, salaries and social security expenses more than tripled to €13.2 million. An exceptional charge of almost €500,000 in respect of “pre-opening expenses” was also recognised as the group switched gears from the pandemic.

Less than five years after it pumped a reported €1m into the fit-out of the Stella Diner beside the upmarket cinema of the same name in Rathmines, the group has torn out the premises

In the end, State supports put a significant gloss on the bottom line.

In a report attached to the accounts, the directors said Covid-19 and “general cost increases” were the primary risk facing Press Up’s businesses despite the post-Covid bounce in trade. No surprise there.

Getting a read on other aspects of the group’s performance is decidedly trickier. While the trading entities have all filed accounts recently, Press Up Ltd, a holding company that holds shares in Workman’s Club and a plethora of other trading companies in the group ultimately owned by the Isle of Man-registered entity Keillan Ltd, has not.

Press Up’s most recent annual return is now more than 18 months out of date. According to the Companies Registration Office, it has been penalised to the tune of €100 for missing the initial deadline and €3 for each day after that and will lose its audit exemption, small potatoes for such a significant player.

In its most recently-available set of accounts covering the period between January 2019 and May 2020, the directors of Orsen Ltd – a group company in which Press Up Ltd’s accounts were consolidated – noted that the “group and company [were] not currently able to meet their liabilities as they fall due and are reliant on creditors’ support and payment breaks”.

This stark warning was not surprising given that it came at a time when most Press Up enterprises were forced to close their doors due to public health restrictions. At the time, this particular batch of businesses within the group had long-term obligations to creditors in the order of around €27 million.

This is just a snapshot of a particular batch of companies at a particular point in time. The good news for McKillen jnr and Ryan is that they have never had trouble attracting funding and their reputation for deploying capital is well established. McKillen’s family reputation is also a bonus.

His father, the veteran property investor and developer Paddy McKillen, is a storied player in the Irish and UK markets and the elder statesman retains a key stake in his son’s businesses.

Earlier this year, Press Up agreed a new €50 million debt facility with Cardinal Capital, secured against Dublin’s Dean Hotel. The Sunday Times reported that the facility would refinance existing obligations and add grist to the mill for further planned expansion of the hotel and townhouse site on Harcourt Street in the heart of Dublin 2. It followed an estimated $200 million (€187.4 million) refinancing of six McKillen- and Ryan-owned hotels at the end of 2021.

Press Up has also secured financing from non-bank sources such as the Avenue Capital-backed, Relm Finance. Founded by Paul Dowling, the former head of AIB’s corporate workout unit, the lender provided funding in 2021 to a McKillen-controlled vehicle for the purchase of the former Larry Murphy’s pub on Baggot Street for a reported €1.7 million.

Company documents filed in the Isle of Man by Oakmount parent Keillan revealed recent Relm charges, including one secured against the shares in a Dublin-registered company called Opal Barn in which McKillen jnr is listed as a director.

The filings also reveal recent charges in favour of Quest Capital Trustees in Dublin and Monaghan-based Cabriz Finance. As with any business, the dizzying rise in interest rates since 2022 presents challenges for Press Up and Oakmount, and with their exposure to non-bank lenders, they are sure to be feeling the pinch.

On the ground, meanwhile, Press Up has continued tinkering with its portfolio of bars, restaurants and other businesses to bring them up to speed with the new post-pandemic trading environment. Less than five years after it pumped a reported €1 million into the fit-out of the Stella Diner beside the upmarket cinema of the same name in Rathmines, the group has torn out the premises, replacing it with a steakhouse in recent weeks, believed to be a more fitting, complementary model for the adjoining business.

A short distance away on Camden Street, two Press Up businesses – DIME Coffee and Rice Chinese – closed over the summer months. Set up in response to the Covid-19 pandemic, the two takeaway and delivery businesses are victims of the drive to return Press Up to its core business as more normal trading conditions have taken hold.

DIME Coffee is understood to have been franchised out to a new owner-operator while the Rice Chinese property is under offer.

Oakmount has also recently pulled back from some of its plans for a new high-end hotel at St Stephen’s Green after withdrawing from the purchase of the building housing the former Hibernian United Services Club and two other transactions involving two adjacent buildings.

Oakmount already owns UK fashion retailer Topshop’s former flagship premises at 6-7 St Stephen’s Green, having paid more than €17 million to acquire the property last year and The Irish Times understands the developer’s plans for a hotel will now be confined to this site alone.

The exact motivation for the decision is unclear but one industry source said would not be a surprise if the rapid pace of expansion that has characterised the ascent of McKillen jnr’s and Ryan’s leviathan slows somewhat against strong, industrywide undercurrents. “Not many can achieve the scale it did,” they said. “But everyone needs to take a breath.”