04_ The late-night sector will remain extremely challenging 05_ The private freehouse sector will grow by at least 1,000 06_ There will be continued private equity interest in the managed house sector and emerging interest in the tenanted sector
01_ Banks will release further assets to the market 02_ Over 2,000 pubs will be sold by the pub companies 03_ Managed public house stock will continue to be in high demand
As with most years, the broader public house sector experienced highs and lows in terms of trading performance and transactional activity, while a question mark still hovers over the key issues of future investment and funding. However, we can look back on a year that was in part dynamic, in part unnerving – but never dull. Freehouses go ‘boom’, in a good way In the private freehouse sector in 2011, values remained lower than their historic peak – meaning that vendors were disinclined to place their assets on the market. This certainly didn’t prevent the sector growing during the year, as the corporate operators who were engaged in estate rationalisation and disposal activity placed many reasonably-priced pubs on to the market. An encouraging by-product of this was the return to the public house sector of many entrepreneurs who had exited at or about the peak. This is likely to provide for a more competitive and, by extension, higher quality sector.
No tsunami of closures from pubco disposals Whilst the freehouse marketplace continues to benefit from pubco disposals, there were fears that the pub property market was becoming flooded with tenanted pubs. In retrospect those fears, and also the suspicion that this would lead to an escalating rate of pub closures, were largely unfounded. The strategies pursued by the likes of Punch and Admiral Taverns was not the signal for disposals of tsunami proportions, nor of more pubs being sold for development. Instead, what we saw was a steady stream of fairly-priced pub disposals from a number of operators. Enterprise Inns, for instance, disposed of over 400 pubs in 2011 and has plans to dispose of 100 pubs from its high- end estate in 2012. In our experience, where there are good disposals, a better quality of operator follows – both in the freehouse and tenanted sectors. And far from increasing the rate of attrition, there is a real case for believing that more sold pubs are staying as pubs under new ownership. In 2010, some 60 per cent of the pubs sold by Christie + Co from the tenanted pubcos’ churn were bought to remain as pubs. With the quality of proposition that the pubcos are bringing to the marketplace now, not
to mention the volume, that percentage increased to 64 per cent in 2011. Moreover, of those pubs that do close, it is reassuring, to a degree, that many are retained for some form of leisure industry usage, such as restaurants. The pub market is still oversupplied and a further 2,500 – 3,000 pubs need to go over the next two or three years if we are to achieve a sustainable marketplace, bringing choice and quality for customers. And what of the closed pub? Some are serving, and will serve, their communities better through alternative use. For instance, during 2011, Christie + Co sold a pub in Gloucestershire to the local Salvation Army which intends to use the premises to create a safe environment for local youth to meet, share and pursue creative interests. This surely has to be more valuable and healthy to the community than a run-down, under-used pub? Tenanted sector awaits the big deal The market occupied by the pub tenancy companies was largely quiet on the transactional front in 2011 – until Scottish & Newcastle Pub Company’s acquisition of RBS’s Galaxy pub estate was announced in December. RBS was advised by Christie + Co throughout the process.
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