L&E pub rent confusion
Uncertainty surrounds whether brewer Carlsberg may still be liable to pay the head rents on around 120 pubs tenanted by its Winlease joint venture with London & Edinburgh Swallow Group (LESG).
Carlsberg formed the joint venture with Winlease in 2001.
Investors who bought freehold pubs tenanted by Winlease were told that Carlsberg guaranteed the head rents until Winlease achieved gross profit of around £3.5m a year for three years - when Carlsberg would be released.
Industry sources believe that Winlease failed to achieve three consecutive years of the required gross profits.
Even though Carlsberg exited the joint venture in 2004 it is believed to be a moot point as to whether it is still liable to pay head rents.
I suspect that Carlsberg really regrets this deal and it is a moot point as to whether it's still liable to pay these rents under the original guaranteeA source close to the original deal
A source close to the original deal said: "For Carlsberg the joint venture was technically not using any capital as far as Copenhagen capital rules were concerned. Carlsberg regarded this as a risk for four to five years.
"The investment rationale was to put the brands into wider circulation without the commitment of capital.
"It was a highly unusual transaction.
"There is now talk of Carlsberg putting some of these sites out to management or doing deals with landlords.
"I suspect that Carlsberg really regrets this deal and it is a moot point as to whether it's still liable to pay these rents under the original guarantee."
According to Companies House documents, Winlease is one LESG company not in administration.
Administrator Ernst & Young is referring all inquiries about the position of investors who had rents guaranteed by Carlsberg on Winlease freeholds to Carlsberg.
A spokesman for Carlsberg spoke o the Morning Advertiser but only to say: "We do not comment on the details of individual commercial deals.
Companies House documents also show that Winlease made a gross profit of £1.6m in the year to September 2004 - and a loss of £1.5m before tax.
In the year to September 2005, it made a gross profit of £4.1m and a profit before tax of £1.6m.
It carried an accumulated loss of £4,774 up to 30 September 2005.
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