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Morning Briefing for pub, restaurant and food wervice operators

Thu 1st May 2014 - Breaking News - May Capital – “we are looking for more deals in the tenanted sector”
May Capital – “we are looking for more deals in the tenanted sector”: May Capital founder Noah Balkin, who acquired 275 Greene King tenanted pubs this morning on the first anniversary of founding the business, has told Propel that he is looking to add to his first portfolio of pubs. He stated that he believes there were further tenanted pubs within the Greene King, Marston’s, Irish banks, Heineken, Punch and Enterprise portfolios that were suited to the company’s operational model – the company, who will operate the sites under the Hawthorn Leisure banner, has already been linked to a R&L package of circa 50 sites, which was formerly part of Robert Tchnguiz’s pub holdings. Balkin, who, prior to setting up May Capital, was involved in £8.5bn of aggregate pub sector mergers and acquisitions during a career with Merrill Lynch and Lazard, said: “May Capital was founded around the fundamental idea that there is a very large number of wet-led regional tenanted pubs that are good quality assets with high quality tenants – but in many cases they are regarded as non-core or sitting on bank balance sheets. They are often owned by people who don’t really want to invest in them or own them.” Balkin said sites had a ‘tremendous amount of potential’ for ‘tailored investment’ and a ‘flexible, innovative approach’. “Greene King, for example, is a phenomenal operator but ultimately has a number of different priorities. Our focus will be on these pubs – for Greene King they are non-core, for us, they are core. We plan to have just 35 pubs per area manager, for example, and have behind us Avenue Capital, which oversees $14n of assets and has a tremendous amount of fire-power. We will looking to invest in the estate in a very tailored and customised way while being innovative and very flexible.” New chief executive of Hawthorn Leisure is Gerry Carroll, who oversaw 4,000 pubs at Enterprise Inns and was involved in Project Beacon, which created a new hybrid tenanted operating template. Asked about Hawthorn’s eventual size, Balkin said: “We’re not fixed on any particular number, but there’s scope to take the company up to a much bigger size.” The portfolio of 275 Greene King tenanted pubs is 98% freehold, predominantly on tied tenancy arrangements. Approximately 192 pubs are in the Southeast, Midlands, East and West of England, 66 pubs are in Scotland, and 17 pubs are in other parts of England. Hawthorn Leisure has partnered with wholesaler Matthew Clark to provide beer, wine, spirits and minerals supply and distribution services. Hugh Briggs, a partner at May Capital, has taken the position of chief financial officer of Hawthorn Leisure. Briggs was a senior member of the financing team at CVC Capital Partners for five years and previously held senior positions at DB Capital Partners and Mid Ocean Partners and worked in leveraged finance at Salomon Brothers, Citibank and Credit Suisse.
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