Lantern Hotel Group, an ASX-listed business 37% owned by NZX-listed Pyne Gould Corp Ltd, has sold 2 hotels in the last 3 weeks, encountered a sale double-up on a third hotel last Friday and will put a resolution to shareholders at its annual meeting next Tuesday, 25 October, enabling it to sell the whole portfolio of 8 pubs.
The board said this didn’t mean it would wind up its operations: “The resolution is intended to give the Lantern board flexibility to consider & pursue all options available to it, including if the board receives offers for all of the core properties.”
Pyne Gould – still listed on the NZX although its business interests are in Australia & the UK, and it wants to list in London – holds its shareholding in Lantern through the Torchlight Fund LP & Torchlight GP Ltd. Torchlight said it supported Lantern’s strategy of creating long-term value by acquiring & operating freehold pubs and buying back shares below net asset value, but the strategy changed last year with a programme to sell non-core pubs.
Lantern said in its annual report this programme had been very successful. From November through to August, it had sold or contracted to sell 7 hotels & a parcel of vacant land for a gross $A43 million at a 14% premium to June book value. In the space of 6 months it had halved gross debt to $A40 million and got net debt down to $A28 million.
Lantern said on 19 September its board had formed the view, after a strategic review, that it should sell down its remaining hotel portfolio.
Chair Graeme Campbell & chief executive John Osborne said yesterday Lantern had entered contracts to sell the freehold & business of the Commodore Hotel in North Sydney for $A14.5 million, which represented a 46.5% premium over the 30 June book value, and the process was underway to sell the Brisbane Hotel in Perth.
In September, the company entered into a contract to sell the freehold of the Central Hotel in Bundaberg for $A1.95 million, 22% below the 30 June book value. The board determined that “meeting the market for this asset would yield a superior financial outcome than investing further and waiting for the local market to recover”. Lantern expects that sale to be completed in December.
Cairns council trumps one sale
Last Friday, the Cairns Regional Council cast doubt on the group’s $A6.25 million sale of the freehold & business of the Courthouse Hotel in Cairns, announced in July.
Lantern had expected that transaction to be completed this month, subject to Queensland Government liquor & gaming approvals. However, the council said in a release last Friday it had resolved to acquire the heritage-listed building “with the objective of creating an art gallery & cultural precinct in the cbd”.
Lantern said it hadn’t received any formal notification from the council about compulsorily acquiring the hotel. However the mayor, Bob Manning, said the council had submitted an expression of interest when Lantern put the building on the market, and was surprised to learn of the sale when the expressions of interest process was still underway.
Cllr Manning said: “We want Cairns to become known as the arts capital of Northern Australia. The opportunity to bring this historic, centrally located building into public ownership for this purpose is one we felt needed to be acted upon. The property adjoins 2 other heritage buildings – the former Cairns Public Office building, now inhabited by the Cairns Regional Art Gallery, and the former Mulgrave Shire Council building.
“Together, these 3 buildings represent a significant piece of our city’s history and would provide an ideal location for the expansion of our cultural facilities. Most importantly, 3 of the city’s heritage-listed assets will be retained in public ownership and available for the use & enjoyment of public & visitors alike.”
Cllr Manning said the council had previously identified the hotel as a strategic acquisition for community purposes: “We had intended to purchase the property through regular commercial channels but were never given the opportunity to do so. That is why we have made this decision to implement our right to acquire the property for community use.”
The mayor’s own business dealings were under the spotlight early this year, ahead of his re-election. Cllr Manning & his wife bought the Events NQ business shortly after his election as mayor in 2012, but the business folded in early 2015. Cllr Manning blamed his focus on the mayoralty, and diagnosis of his wife with breast cancer while she was running the company, for letting the business slide.
31 August 2016: Unrealised gains lift Pyne Gould
Attribution: Company & council releases.