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Pub sales in Wales and the South East

Last year’s poor trading has stirred up the pub sales market in Wales. As was noted in last week’s Publican Wales Focus, the country is “heavily over-subscribed with licensed premises”.

This was the view of Graham Wall, operations director at Cardiff-based multiple operator Dragon Inns. Wall also said: “Numerous towns and villages have pubs and social clubs chasing a vastly reduced customer base.

There will naturally be closures, with many outlets changing to commercial or residential use during the year.” Things may look bleak trading-wise, but how has the pub property market been holding up to all the negativity?

Looking back over 2007, Robin Mence of agents Sidney Philips says it has been a “very vibrant and active market”. He adds: “There was, however, a sharp contrast between the freehold and leasehold sectors with there having been marked decline in the average lease premium attained.”

Freeholds strong

John-Paul Humberstone of agents Humberstones admits that “many businesses have seen their turnover decline”.

He adds: “This was inevitable with the smoking ban and poor tourist trade during the summer.”

However, despite poor trading, Humberstone says that demand for quality freeholds is remaining strong, but agents and owners must be realistic about the price at which their pub goes on the market.

Bill Evans, a sales negotiator at Fleurets’ Bristol office, agrees that freehold demand, as ever, is holding up.

“Freeholds are a different matter and established businesses with reliable accounting history are still attracting purchasers and funding, although the loan-to-price ratio is decreasing as banks and other lending sources seek to lessen their risk,” he says.

Disposals

One significant effect of the smoking ban has been to increase churn by the major pubcos of their lower-end pubs.

However, Evans points out that these pubs are still seeing interest from buyers. “These have readily attracted sellers,” he says.

“Many of these units are closed and it offers a cheap entry to the freehold market to build the business. Other units are purchased for alternative use, chiefly residential, where planning consent can be readily available.”

Lease market

The leasehold market has been more unpredictable throughout Wales, according to agents.

Mence notes that in this area there has been a “marked decline in the average lease premium attained”.

However, Humberstone says the leasehold market remains strong, though he adds:

“With prices varying so widely on advertised properties it makes it extremely hard for purchasers to determine what the right price is for the businesses they are looking to buy.” Humberstone’s advice to prospective sellers is to ensure the price your pub is being marketed at is “realistic” and to be sure your business is presented in the best possible way.

Predictions for 2008

Mark Greig (Paramount Investments): “Despite the fact many of the pubs we sell have large amounts of land attached to them, they still do not sell as quickly as similar pubs would in other regions of the UK.“There are excellent opportunities on offer for entrepreneurial lessees or freetraders to realise the potential locked within some of these pubs, as they clearly have a number of options in the spheres of smoking provision, food and tourist appeal.”

Bill Evans (Fleurets): “Predictions for the next 12 months are always difficult as the current volatility of the market indicates that there is no simple remedy for the economy.“However, spring traditionally kick-starts the marketplace, and I hope that 2008 will be no different.”

Robin Mence (Sidney Philips): “To judge what 2008 holds for the pub market in Wales is, of course, difficult and it is too early in the year to base any such forecast on the activity to date. I do, though, expect the patterns of 2007 to continue, with there being a strong demand for freehold public houses, hotels and restaurants, but the leasehold market continuing to be over-subscribed and difficult. However, one thing of which I am certain is that there will always be buyers for good pubs with good profits.”

Read more about pub sales in Wales at The Publican

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