A leading City analyst, a consistent critic of Mitchells & Butlers (M&B) strategy in the past year, has poured cold water on its plan to convert to real estate investment trust (Reit) status, writes Paul Charity. Douglas Jack, of Panmure Gordon, said a Reit structure is unlikely to create value. He said: “The tax saving would be a minimal £20m per annum against an upfront cost of £200m to £225m. "In addition, the operating company would lose property flexibility." “In addition, the OpCo would face RPI-linked rental inflation on £240m of its initial £285m annual rent roll. “This could result in financial distress in the OpCo on the basis that uninvested like-for-like sales have always been below the current rate of RPI during any reported 6-month period (certainly in this decade).” Jack also criticised the amount M&B has spent on the strategic review that started in January – a total of £12m. He said: “In our view, this is excessive in comparison to the quality of the outcome." He also noted that management lost another £16m on hedging positions in its first half. He added: “Overall, the operational presentation was as much about tough conditions and competitor weaknesses as M&B’s strengths. "We do not entirely disagree, although data showing M&B average beer prices to be 40p cheaper than tenanted pubs is inaccurate; the latest CGA data shows M&B to be 2.2% (6p per pint) more expensive than Enterprise Inns and Punch Taverns. “M&B is performing well operationally, aided by good assets, in a tough sector. “However, there is no material upside from a Reit other than efforts to extract freehold property value.”