Auctions see rise in freehold pubs
More and more private owners of freehold pubs are selling them through public auctions, a leading auctioneer has claimed.
John Barnett, of auctioneer Barnett Ross, said a large rise in the number of private investors looking for property-backed investments has boosted the auction market in recent years. Investors are being tempted to buy freehold pubs that have a sitting tenant who has signed a long lease. The return on capital can be upwards of 10% - often twice what can be achieved if investors' money is left in the bank.
Barnett Ross and other major auctioneers currently send out around 10,000 catalogues for each major property auction - a reflection of the huge pool of would-be property investors.
Barnett said: "More and more pubs are going to auction. There is a much greater range of vendors and the pubs are being sold across a greater range of auction houses.
"The investment market has definitely improved, thanks to low interest rates."
Barnett claimed that as many as 80% of people buying a pub investment haven't actually been to the auctioned pub and rely on details in the catalogue.
"They don't have to actually go around and look at the pub," said Barnett. "They weigh up the tenant and weigh up the property's worth without a tenant."
London & Edinburgh Swallow Group and Provence have been the two corporate vendors most active in the auction market in recent years. They have been selling pub freeholds with a lease back to themselves and a sub-lease to individual licensees.
Barnett said: "The auction market has given them a new outlet. Companies can get one price for selling the freehold and another price for the lease."
Provence, founded four years ago by Paul J Kiely, has actually been less active in the auction market in the first six months of its current financial year, which started in November 2005. A survey by the Morning Advertiser shows the firm has sold around 20 pubs at auction for just over £8m. In the same six months the previous year it sold 39 pubs for just over £14.5m.
