On-trade

Dublin pub sales up 130%

Sales of pubs in the Dublin market showed a dramatic increase (130%) on the previoius year for the first time since the peak of market sales back in 2006 according to Morrissey’s Year End Review 2014 & Outlook 2015, just published

Some 46 Licensed Premises changed hands in the capital last year, states the acutioneer – about 6.3% of the total number of licensed premises in the Dublin market – topping €52.6 million in value and up 248% on the previous year’s €15.1 million figure.

The average price of a licensed premises in 2014 increased by €0.38m to €1.14 million compared to €760,000 in 2013 “reflecting both a greater volume of Licensed Premises transacting and stronger purchase prices being achieved when compared to previous years”.

The vast majority of sales (78.26%) were by private treaty with 17.39% of premises sold at auction and 4.35% sold post-auction. None went to tender last year.

According to the auctioneer, “Performance in the property market this year has seen considerable increased activity… together with growth in valuation in certain sectors of the market, albeit that this growth in valuation has come from a low valuation base as a result of the collapse of the market in 2008”.

The report points to the growing evidence of a stabilisation and growth in the volume of trade enjoyed “in certain sectors of the market”, principally the main population centres and tourist districts of the country. This has led to increased market confidence in ascertaining the volume of trade that could be sustained over the short to medium term and this, in turn, has underpinned market valuations, according to Morrissey’s who cites growing optimism in the licensed premises property sector.

“There is confidence that the trade is emerging from a sustained period of significant turbulence albeit for businesses that are located in economically viable business locations,” states the report, “Accordingly it is becoming more straightforward for potential Vendors, Purchasers and Professionals alike who have heretofore experienced difficulty in gauging ‘sustainable and maintainable turnover’ to be more accurate in forecasting the future trading prospect of a business and in turn the true market value of trading units”.

The oversupply of licensed premises nationally means that consolidation will remain a factor of the market “… and will ultimately contribute to a recovery of the industry on the whole. This is borne out with the majority of the activity in the market place to date being distressed sales.

“Demand as always from purchasers was for Licensed Premises which are well-located with an established population and good transport links, whether they are located in ‘City Centre’, ‘Mid Town’ or ‘Suburban’ locations. These Licensed Premises which usually enjoy a good ‘Population mix’ (combination of Residential, Office & Retail) enable operators to enjoy a throughput of business throughout the day and evening, driving the volume of business enjoyed and in turn economies of scale and profitability. However Licensed Premises that are located in trading ‘Fringe Areas’ or do not enjoy an optimum Floor Plate and a viable business model did not fare well.”

 

Valuation

Morrissey’s reports that Capitalising ratios continue to consolidate with adjusted average multiples of turnover for wet sales in the on-trade ranging between 0.5 and 1.5 times turnover at the end of last year.

“These ratios are applicable to Licensed Houses where the business is already exploited, the property is in good repair and condition, takes into consideration the size, throughput and type of business enjoyed, profitability, consistency of trade, target market etc.”

The report continues, “Cap Ratios in excess of the above are achieved for Licensed Premises affording future business growth or alternatively businesses that enjoy a considerable volume of trade with ultimate economies of scale and a substantial bottom line profit ie top tier of the licensed premises property market”.

Cap ratios below the above reflect Licensed Premises that enjoy poor economies of scale regarding the volume of trade enjoyed and in turn profit generated, states the report.

The market forces that prevailed in the Dublin Market were mirrored generally speaking in The Provincial Market as set out previously.

 

Outlook for 2015

Morrissey’s expects the improved market sentiment, which played a valuable role in the emergence of a recovery in 2014, to continue throughout 2015 “which should further promote market confidence and in turn regenerate activity.

“Importantly there are an increased number of funded purchasers (both through Financial Institutions and Personal Funds) that have entered the market over the past 24 months seeking quality business in key trading locations which naturally bodes well for both operators and the marketplace on the whole,” concludes the report.

 

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