THE AGENTS
Paul Davey
Managing Director, Davey & Co
Sale and leaseback - why on earth would you want to do that? This is a question that seems pertinent to ask just now, as some agents seem obsessed with promoting this hardly innovative form of sale to freehouse owners.
In my opinion, this is due partly to the readily saleable superficial capital-release gains which this form of sale can provide without the requirement for the owner to move, and partly (and unfortunately more cynically) to the fact that it enables the agents solely retained by pubco operators to offer a fait accompli to their corporate paymasters.
Let's face it, this can be a great deal for the acquiring pub company - it takes the freehold property and works out a huge rent to provide an arguably indecent return on its capital investment, and it ties in the wet-sale trade to add to the already vast volumes it uses to secure huge supply discounts, which are not fully passed on to their lessees. And to top it off, the pubco doesn't even need to bother with the hassle of finding a competent operator to take on the lease. Sweet!
The flip side of this apparently highly efficient means of selling - without recourse to the tiresome process of promoting your business on the wider, open market - is simply that you are in danger of taking cash with one hand but giving back an awful lot more.
This does not only apply in terms of cash through high rents and lost discounts, but also through serious restrictions on ways of operating your business, without knowing for sure who else is out there and whether or not a better price, or more favourable sale terms, are available.
By carrying a non-assignment clause, sale-and-leaseback deals also usually lock you into the lease for a minimum of two years.
It is true that in some circumstances this form of sale can meet your objectives and may be appropriate for you - not least by offering the opportunity to sell on your new tied lease after the non-assignment period ends.
But remember that you can only sell your freehouse once - so when you do, aim to get it right.
This is a case of "seller beware", so I strongly suggest taking independent advice before committing to anything.
