Holding its own

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Although the residential property market is in something of a slump, the same cannot be said of pubs at all. Michelle Perrett reports.Sales of...

Although the residential property market is in something of a slump, the same cannot be said of pubs at all. Michelle Perrett reports.

Sales of licensed premises are still booming despite all the doom and gloom in the residential property market, says Richard Payne, national sales director for Guy Simmonds. He argues that despite the fact that the housing market is stagnant, and during the financial quarter high street sales were down, the commercial property market is doing well.

But he warns licensees to be wary of agents who charge upfront fees and pitch with over-inflated asking prices in order to secure the instruction.

"It is important to look at what is really happening in the market and a multiple of twice your yearly reconstituted net profit is probably the maximum you can expect for an all-singing roses-round-the-door lease assignment at present," he says.

Mr Payne also argues that it is a "popular misconception" that owing to the lack of freehold properties available pubcos and brewers will part with ridiculous amounts of money to get their hands on one. This is "blatantly not the case", he believes.

"Although pubcos and breweries have bigger purses, they are neither suicidal nor stupid and as a general rule will work to the same freehold multiples," Mr Payne points out.

Freehold pubs represent a tremendous investment opportunity, with a strong sustainable rental income and solid property value retention, he argues.

The rationalisation of the market means that as larger (and many smaller) pub companies look to sell their bottom-end estates, you could be onto a winner where others have failed if you have the right tenant for the right pub. A sale and leaseback deal is another lucrative way to beat low money returns and interest rates in savings accounts, the agent says.

The lack of freeholds is not resulting in price hikes in leases as the banking fraternity, and lending houses will loan 50 per cent of the pub at best, keeping the asking prices at around one to 1.5 times reconstituted net at present.

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