The Reit result for Tuppen?

In recent times Ted Tuppen has been noticeably absent. After leading the creation of one of the biggest leased group’s in the land and establishing a reputation as one of the sector’s best dealmakers, he has steered clear of the deal table. And following a busy period with licensing reforms and the smoking laws, the charismatic chief executive of Enterprise Inns also seems to have stepped back from his role as industry lobbyist-in-chief. The reason for this period of relative quiet may be beginning to emerge, for Tuppen has been ploughing his own furrow. There is a growing body of opinion that Enterprise may, against expectation, be successful in its efforts to persuade HM Revenues & Customs that is should be allowed to form a structure that qualifies for tax-efficient Reit – that’s Real Estate Investment Trust – status. Although there is still a fair way to go, the leased pub giant is thought to have advanced its negotiations. Analysts suggest the very fact that the FTSE 100 group is still in discussions with HMRC is cause for optimism. Last week Morgan Stanley upgraded its stance on Enterprise. Now, there is nothing unusual in a company’s house broker plugging its shares, but within an accompanying research note, analysts suggested that the company now had a 50% chance in converting to a Reit, the tax savings from which could be worth up to 160p per share. Morgan’s analysts were quick to add they did not have any specific knowledge of how negotiations were progressing, merely stating that while there was a 50-50 chance of a successful conclusion, the market had assumed there was a zero chance. Enterprise and its lawyers CMS Cameron McKenna remain tight-lipped. Sources close to the situation insist nothing has changed, but perhaps there is something in the no-news-is-good-news assertion? It is thought Enterprise is attempting to argue that it should be allowed to benefit from Reit status, through the creation of a middle company (Midco). At one end would be the Reit, at the other would be the Enterprise Opco that would recruit licenses, run the agreements and supply tied products, and in the middle would be the Midco, that would receive all the revenues and pay rent on the assets to the Reit. Elsewhere, other analysts are sceptical but people have bet against Tuppen before, and most of the time they have lost. He may now be about to return to the industry spotlight – and with some gusto. The devil drink The Prime Minister entered the alcohol debate last week, promising tougher action on excessive drinking and underage consumption. Gordon Brown described so-called “binge drinking” as “unacceptable behaviour”. This seemed a little harsh, given that by the government’s own standard, this is defined as consuming four pints of beer in one sitting. The PM promised a greater focus on pubs and clubs where extended licensing hours had created increasing problems of disorder. If this can be interpreted as a greater focus on bad operators, then fine. But with an impressive and growing track record for getting things wrong, one worries about what exactly the government and its advisers have in mind. And is it too cynical to suggest that the “devil drink” has made a particularly convenient and timely return to the front pages? With revenues tight and an under pressure chancellor facing his first Budget in just over a week, it feels particularly expedient for all this talk of alcohol to once again come to the fore. There is a valid argument – again reiterated by the BBPA this time around – that with every tax hike on alcohol the Treasury actually loses money through falling retail revenues. Given the delicate state of consumer confidence and with businesses facing unprecedented cost pressures, tax increases would be less welcome than ever. But with its recent blunders over Northern Rock and capital gains tax among other things, plus a growing sense that this government is rapidly losing touch, especially with the business community, it unfortunately cannot be relied upon to make the right call, especially not for this industry. Consequently, further hikes in the so-called “sin taxes”, including alcohol, now feel inevitable. And it must be helpful for the government to have those “sins” overtly playing out on the front pages of our national newspapers. But perhaps I am being too cynical?