'Unrealistic' freehold values frustrate buyers

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Licensees selling freehouses have been accused of having "unrealistic expectations" in the current market. Pub companies and brewers which are...

Licensees selling freehouses have been accused of having "unrealistic expectations" in the current market. Pub companies and brewers which are looking to expand their estates are claiming they cannot find the quality freehouses they require at reasonable prices.

According to agent Christie & Co around 3,000 to 3,500 freehold pubs come onto the market each year, but pub companies buy only about 700 to 800 of them.

There are around 17,000 freehouses owned by licensees in the UK - which make up just under 30 per cent of the country's pubs.

Colin Wellstead, director at Christie & Co, argues that while pub companies and regional brewers are keen to get their hands on freeholds, they are complaining that they are turning down more pubs than they can buy.

Neil Griffiths, acquisitions director at Punch Taverns, claims that licensees are trying to sell their sites for unrealistic prices. He said: "We consider high numbers of properties on a daily basis, and we would agree that it is difficult to find good quality freehouses at reasonable prices.

"One of the key reasons for this is the unrealistic expectations owners have when it comes to the value of their businesses."

However, Tony Payne, chief executive of the Federation of Licensed Victuallers' Associations, said: "There are many freehouses that are viable to buy. I don't think licensees are expecting too much money for their pubs when you see some of the pubco leases going for £200,000."

Alternative use adds value

Increasing numbers of pubs can attract a higher price for "alternative uses" according to Colin Wellstead. Most sites available for transfer to alternative use were concentrated in and around London but this is now spreading into other areas of the country.

Pubs are being sold for as much as £3m, and sometimes even higher, either for conversion into homes or for demolition so that houses can be built on the site.

The demand for freeholds has also resulted in increased demand and prices for leasehold pubs, say Christie & Co.