The deal to acquire pub landlord Hawthorn Leisure from an affiliate of Avenue Capital Group takes the NewRiver pub estate to 629 and follows purchases from Martson’s in 2013 and Punch Taverns two years later. The estate includes scores of watering holes in Scotland.
NewRiver, which is structured as a real estate investment trust (REIT), said the £106.8m Hawthorn deal represented a net initial yield of 13.6 per cent and included an established brand and pub management platform.
The firm said it had identified the pub sector as an “attractive investment” to deliver on its business strategy, while offering the potential to build convenience stores or residential units on surplus land adjacent to pubs.
Chief financial officer Mark Davies said that while the sector had its challenges, it also offered up opportunities.
He told The Scotsman: “We have been in the pub sector for five years now and we are really excited about this particular opportunity. It also comes with a good management team.
“People see local pubs closing down or changing use and assume that this is happening all over the country, but if you know what you are doing and you have a good team and are well capitalised, these assets can generate high profits. It is a very scalable asset class.”
Chief executive Allan Lockhart said: “The acquisition of Hawthorn Leisure is absolutely aligned with our strategy of investing in retail and leisure assets at the heart of the communities across the UK.
“The portfolio is highly complementary to our existing pub portfolio and the combined portfolio remains below 20 per cent of our total assets.”
NewRiver was co-founded by its executive deputy chairman David Lockhart, who founded Glasgow-based Halladale in 1991 – a firm subsequently bought by Stockland Corporation in 2007. NewRiver has a £1 billion-plus portfolio comprising shopping centres, retail warehouses, high street assets and pubs.
Allan Lockhart said: “There is no doubt that the retail sector is facing headwinds but our experience is that consumers still want to shop in-store. What is changing is that people are increasingly focused on value for money and in that regard it is no surprise that the discount sector has been doing very well.”
He added: “Our portfolio is centred on convenience and community. We’ve been going for nine years and every one of our assets has been hand picked.”
News of the pubs purchase came alongside solid full-year results which revealed a 26 per cent rise in IFRS profit after tax, to £45.7m.