It's nearly time to place the next order on the carousel that is the Dublin pubs market
After filing plans last week to flatten Howl at the Moon pub, which he recently bought for €3.2 million, and develop a new boutique hotel on the site, Paddy McKillen Jnr reaffirmed his position as the most active of the new Dublin pub barons.
The old barons of the last boom – Louis Fitzgerald, Charlie Chawke, Jay Bourke and their ilk – are still in business. But it is the new barons – McKillen, Bodytonic's Trevor O'Shea, Loyola's Stephen Cooney, Alan Clancy of House – who are doing almost all of the expanding these days in the frenetic Dublin pub scene.
McKillen's Press Up Entertainment Group has emerged on top of the pile of owner/operators, with a collection of more than 20 hip venues including Peruke & Periwig and the Vintage Cocktail Club. The Stella pub/cinema in Rathmines will soon be added to that roster.
It is notable, however, that most of Press Up’s operational focus next year will not be on the opening of new pubs, the sector it blitzed in the recovery years. Rather, 2018 will see Press Up open several new boutique hotels, including in Ranelagh, North Wall and, probably in early 2019, on the Howl at the Moon site.
There is no suggestion that McKillen has called the top of the Dublin pubs market. But it will be interesting to see if the battalion of foreign private equity firms that have recently swarmed around the pub sector do so in coming years. When the likes of Bain Capital's Sankaty, which bought the loans of 66 pubs as part of Ulster Bank's Project Coney in 2015, make for the exit, the market could enter another cycle.
The Dublin pubs market is only beginning to normalise this year after more than a dozen years of undulation worthy of the Assyrian Empire.
The first cycle occurred during the frankly bonkers few years at the very height of the last boom, between 2004 and 2007. As the domestic economy overheated, the original Dublin pub barons became national celebrities with hopping city centre hostelries that threw off endless piles of cash. That’s how the likes of Chawke and Fitzgerald ended up investing in Premier League football clubs.
In addition to this, the desperate clamour for housing during that era’s property bubble meant suburban pubs with car parks saw their values skyrocket as “alternative use” redevelopment plays.
Chawke’s €22 million outlay on the Old Orchard Inn in Rathfarnham was the most egregious example. Banks lathered the pub sector in cash.
The next cycle came with the crash in 2008 and 2009, when the domestic economy went off a cliff. Many pubs, some of which had only just changed hands for enormous sums in debt-driven deals, quickly became distressed assets. Buyer's remorse set in as insolvencies swamped the sector. Lenders such as Bank of Scotland, which had heavily backed the sector, soon realised their mistake.
Within a couple of years, the next cycle arrived when loans attached to many Dublin pubs found their way into work-out portfolios. As the recovery kicked in, many of these were snapped up by debt-free local buyers, some with private equity backing. In latter years as pub values rose sharply again, overseas funds invested directly, buying up entire portfolios. Sankaty, Lone Star and Goldman Sachs all sniffed around, although Goldman was probably more interested in hotels.
This “foreign money”, as the local publicans call it, is not long-term money. These funds will look to crystallise a return on their investments soon. The pub loans they hold could be refinanced by the local banks, completing a circle back to the last boom. Or the pub assets they indirectly hold could start to drift onto the market, possibly providing fresh opportunities for the new breed of pub barons. But when?
The short-term outlook is now about as good as it is going to get. The boom in tourism, which has supercharged city pubs, is at a critical juncture following the Brexit vote. UK tourists account for 40 per cent of Ireland’s total, and many visit Dublin for the pubs. That part of the market has likely peaked following Brexit.
The domestic consumer economy is currently healthy, with bar sales growing at about 2.8 per cent and Ireland nearing full employment again. But the medium-term future is difficult to predict because of Brexit and other factors, such as the economic influence on Ireland of the nationalistic policies of US president Donald Trump.
And the current city housing shortage, which has brought the spectre of the “alternative use” value of outer Dublin pubs back onto the agenda, won’t go on forever.
Overseas financial investors will be weighing all these factors now, as they consider when best to exit the pub sector.
Whose round is it next?
Ahead of last Saturday’s Leinster rugby Pro12 match against Connacht, the Dublin-based club’s supporters branch circulated an email listing which overseas broadcasters were showing the match.
BeIn Sports, for example, was listed to show the game in the Middle East, Australia and the US; Setanta was on the roster to broadcast the game in Asia; and Kwese Sports was listed to cover Africa.
The listing for the Caribbean, however, must have stuck in the craw of one of Leinster’s most prominent fans, businessman Denis O’Brien. The game was listed to be broadcast in the region by none other than Cable & Wireless, the nemesis of O’Brien’s Caribbean telecommunications company, Digicel.
Cable & Wireless is owned by O’Brien’s rival billionaire, John Malone, via his giant telecommunications group, Liberty Global.
Considering O’Brien’s support of Leinster has even extended as far as paying some of the cost of the team’s stars such as Johnny Sexton, it is interesting to see his telco rival stepping in to broadcast Leinster matches on Digicel’s turf.
The Dublin arm of Matt Mullenweg’s Californian tech company Automattic, which owns the globally popular Wordpress blogging platform, has been struck off by the Companies Registration Office and dissolved.
The most recent annual return filed for the Irish entity, Aut O’Mattic A8C Ireland, was for 2014. The company was strike-off listed by the CRO in January. It was finally struck off on April 15th, and it was relisted as dissolved this week. The company’s address is listed at the offices of an IFSC legal firm.
Aut O’Mattic (how cute, guys, really) previously made headlines when it was dragged into a legal dispute during the bitter battle for control of Petroceltic International. The exploration company’s then-management team went to the High Court to force Wordpress to reveal the identity of the author of a critical blog.
It is time to hit the refresh button if Automattic wants to get its Irish entity back on the company register.