TRENDY Melbourne pubs including the Botanical in South Yarra and Bimbo Deluxe in Fitzroy could be on the market after hotels group Cornerstone called in receivers to deal with crushing debts.

The Age - 28th Mar 2009 - NATALIE CRAIG, PROPERTY REPORTER

TRENDY Melbourne pubs including the Botanical in South Yarra and Bimbo Deluxe in Fitzroy could be on the market after hotels group Cornerstone called in receivers to deal with crushing debts.

Cornerstone Hotels spent $65 million during the boom in 2007 buying more than a dozen high-profile Victorian pubs, but is now feeling the pressure of the bust, with recent attempts to sell some of its assets failing to appease creditors.

Pubs including Half Moon in Brighton, the Great Northern in Carlton and Lucky Coq in Windsor could now be up for grabs as receivers raise cash to pay off debts owed to banks and food and drink suppliers.

The group is also reported to owe months of unpaid superannuation contributions.

It has already sold Q Lounge in Melton, the Local in Port Melbourne and Richmond's Public House. The Palace in South Melbourne has also been sold, pending settlement.

Reports that the freehold of the Tote in Collingwood has been sold were incorrect, although the chances of it finding a buyer look slim after the property passed in at auction earlier this month on one bid at $1million. Cornerstone bought the property in 2007 for $3.2million.

Selling agent Peter Board refused to comment on the sales. But he said although the pubs were still performing well, the credit drought had made it a "difficult time" for buying and selling.

The amount of money that has changed hands for pubs in Victoria has plummeted in the past few years. CB Richard Ellis reported about $100million in pub sales last year, down on the $130million taken in 2007, and $168million in 2006.

Non-gaming pubs, such as those owned by Cornerstone, accounted for only $29million in CBRE's sales last year.

Entertainment venues generally have suffered from the combined effects of a downturn in discretionary spending and new gaming and smoking regulations, with listed companies such as ING Real Estate Entertainment Fund and Hedley Leisure and Gaming Property Fund slashing earnings and putting scores of pubs on the market.

Cornerstone managing director Ben Niall said it had been a tough few years, with the financial crisis compounding existing cash-flow issues.

He said he would work with banks and receivers to focus the company on just eight pubs, but denied the Botanical or Half Moon would be among those sold.

"Not the Botanical, and not the Half Moon, definitely," he said. "Are we swimming in cash? No we're not. But we've got a lot of very good assets that will form part of the group going forward."

Mr Niall said the Tote was likely to be retained as a live music venue. "The best use of that asset is to run it as it is," he said. The Tote's lease expires in October.

Mr Niall also denied reports the group was "thrown out" of Ballarat pub the Bended Elbow, and that it had instead discontinued the lease after the landlord had failed to meet obligations relating to renovations.

Cornerstone's expansion into gastro-pubs follow successful investments in venues anchored by pokies. A high-level Cornerstone employee said he believed the group had unravelled by attempting to do too much. He said Half Moon and the Botanical had been forced to "pick up the slack" for underperforming pubs in the group.

"The approach of the company was a problem - it created a really complex infrastructure, handling dozens of hotels from head office using high-maintenance systems ... Those pubs are supposed to be about personalities."

But a source close to Cornerstone said the problem lay with the pubs themselves. He said the group intended to litigate against some previous pub owners for allegedly misrepresenting their earnings.

KEY POINTS

Several Melbourne bars are set to change hands as Cornerstone calls in receivers.

MD says Botanical and Half Moon will not be sold.

The company is said to owe months of unpaid super.