The confidence in the long-term prospects of the hospitality sector in Wales has been given a massive boost with the sale of a 95-strong pub portfolio to a London-based investor.

The investment sale of the pub portfolio to Song Capital & Partners from Cardiff based S.A. Brain, is one of the most significant in recent years, says Peter Constantine, managing director of Avison Young in Cardiff, who advised on the portfolio sale.

“To attract a London based investor to acquire a Welsh based portfolio at this level of yield (sub 6%) is a good sign that the hospitality sector is seen as a secure investment.

“The portfolio sale, which included both freehold and leasehold properties, all let to Marston’s Estates on 25-year leases, secures the future of these pubs across Wales. This was a deal that faced several headwinds throughout including lockdowns, inflation, interest rate rises and rising global uncertainty, but now done, allows S.A. Brain the foundation to continue brewing their famous beers at The Dragon Brewery in the heart of Cardiff.”

Jon Bridge, Chief Executive at S.A. Brain, said:

“ Despite the headwinds that Peter has mentioned, I am pleased to have concluded this deal. The team at Avison Young played a key role in supporting us through this significant transaction. Our long-standing relationship with Peter and the wider Avison Young team will certainly continue as we continue to evolve and grow the Brains brand into the future”

Peter continues,

“The hospitality sector has been under unprecedented pressure since March 2020 due to the Covid lockdowns and now inflationary pressures affecting the whole economy. During this period, we have also seen added demands due to staff shortages and rising labour costs with the competitive employment market.

“The impact that this has had for many hospitality companies is that margins have been squeezed with cost increases being difficult to fully cover. Household incomes have been squeezed too, resulting in customers seeking out value for money within an already competitive marketplace. This adds extra pressure for operators to fully cover cost increases by raising their prices.

“What appears to be evident though is since the relaxation of Covid rules the demand for good quality food and beverage offerings has been high, as has the appetite for experiential leisure offerings which have proliferated over the last 12 months, and so we’re seeing continued investment by operators in new and existing businesses.”

Wales has seen new pub companies being established thanks to the strong demand in the market across the full spectrum of leisure. One example is the Valiant Pub Company, with experienced well-funded management teams, who bought 17 pubs from S.A. Brain across South Wales with plans to invest in order to capitalise on the demand from customers. Valiant operate a number of trading formats and have a good track record of changing the fortunes of pubs which have traditionally struggled often due to a lack of investment.

An example is the Admiral Napier in Canton which has received a substantial investment and which is now trading ahead of expectations thanks to a full refurbishment and repositioning of the outlet. The Punch House in Monmouth is another,  where Valiant has invested and improved trading performance.

Peter concludes,

“In Cardiff we have seen new experiential offerings such as Par59 and NQ64, with Flight Club opening in the Autumn. This is the sign of confidence in the sustainability of the city centre for these businesses which are capital intensive and therefore require high levels of trade to generate a return on investment.”