By John Harrington
Has there ever been a better time to be an acquisitive pub operator? As Peter Hansen, the founder of Sapient Corporate Finance, has pointed out, pubcos still have about 5,000 pubs to sell from their non-core estates.
Punch Taverns alone still has more than 1,500 pubs to let go, and just as it was starting to wind down its disposals, in May Enterprise Inns announced plans for a fairly quick sale (six to 12 months) of up to 100 more “exceptional” sites.
Well-established operators have been quick to jump on the latter opportunity and several acquisitions have been announced this month alone, including four each to Shepherd Neame and The Restaurant Group and two to Brakspear.
Last week a fresh slew of pubs were put up for sale from two companies that have fallen into administration: Farlane Property Group, with 23 sites, and Sarumdale, with 13. Even JD Wetherspoon has taken the unusual step of advertising three freeholds and two closed leasehold sites.
Added to the 49-strong package of closed freehold and long-leasehold pubs made up of venues from the former Pubfolio and Goldtry estates that were placed on the market last month, the extent of the opportunity becomes clear.
Hansen has said that although there may be a tenanted package deal this year, the market for packages since 2007 has largely disappeared (Heineken’s £422m acquisition of 918 pubs from RBS last year aside). Single-site (or very small package) acquisitions are therefore likely to dominate sales in the coming months.
So who’s buying? Perhaps an easy question would be, who isn’t? There’s been no shortage of firms looking to take advantage of these opportunities. Among the traditional regional operators, Fuller’s can be added to the names of Shepherd Neame and Brakspear of those to have made recent acquisitions. St Austell is reportedly in negotiation on sites following fresh funding earlier this year, and Hook Norton has named 16 target towns and cities.
Another historic operator eyeing acquisitions is Manchester-based JW Lees. In April it announced it had bought two from Rochdale-based Deckers Restaurants - the Plough & Flail Pub and Restaurant in Mobberley, and the Rope & Anchor, Dunham Massey - and last month it secured another two from Spirit Pub Company’s leased estate: the Rope & Anchor in Woolston and the Blue Bell in Eccles.
“This year the plan is to buy another ten pubs,” managing director William Lees-Jones told North West Business Insider. “We’ve got an excellent relationship with our bank, Royal Bank of Scotland. We can afford to buy ten pubs because the property market is on its arse. The recession presents an opportunity.”
This opportunity is also being seized by a selection of well-funded multiple operators, eager to add to their estates this year. Just to scratch the surface, there’s the private equity backed (Amber Taverns, Wear Inns) the Enterprise Investment Scheme-funded (City Pub Company, Convivial London Pubs), those with brewery-backed financing (Peach Pub Company, Maclay Inns), not to mention the self financed; InnBrighton, for example, which is making swift inroads into the London market.
Then there are the experienced operators looking to re-enter the sector. Whispers that Michael Cannon, the serial pub entrepreneur and turnaround specialist, who sold the 135-strong Eldridge Pope business to Marston’s for £155.1m at the start of 2007, is reportedly looking to make a return to the sector haven’t died down. At the same time, M&C Report understands that Peter Brook, the leased pub industry veteran, is in talks with backers to acquire the right multi-site opportunity.
Earlier this year, industry veterans Adam Hogg, founder of Conquest Inns and Richard Ward, former managing director of Marr Taverns, set up a new company – Hoggwards – to create a group of food led pubs in the South of England, while John Miller, the former boss of JM Inns, which operated c.50 pubs across the south coast in the 1980s and 1990s, is eyeing plans to start a new pub group in the UK, after secured his first site, the Woodman Cotes near Chichester.
One interesting sub-sector that’s starting to raise its head higher above the parapet is the craft beer bar operator. Scottish firm BrewDog is arguably the most expansive, with plans to open 10 bars this year, but others have been ramping up their rollouts. Craft Beer Company has taken its third London site, in Brixton, while Bloomsbury Leisure, operator of the well-regarded Euston Tap and similar outlets at stations nationally, is looking to take the concept into the Square Mile for the first time, with Bristol next on its list.
Meanwhile, Neil Morgan, head of pubs at property agent Christie + Co, said there’s still a steady flow of new entrants and owner-occupiers looking for a second site, while sales for alternative use are continuing.
That’s not to say that bargains will necessarily be easy to come by. One medium-sized pub operator told M&C Report: “I think that at the moment the people who own good freeholds, and have owned them for some time, are slightly unrealistic about price. If it’s worth £1m five years ago at the peak of the market there’s an assumption that it’s still worth £1m, whereas it’s actually worth say £750,000.”
But Morgan sounds a positive note for acquisitive operators. “As time goes on the quality of the pub disposals that are coming to the market should in theory get better.” Even among more tired sites that have suffered from a lack of CAPEX in recent years, typically from operators that have fallen into administration, buyers are not deterred, he said. “They are happy to take these on if the price is right.”
