Plummeting prices demonstrate investors' lack of faith, says The PMA Team
An Allsop auction has provided the first indication that investors are now wary of buying pubs at public auctions. The auction last month offered 17 pubs for sale as investments, but 10 were left unsold. A further two were withdrawn, with three sold prior, one sold after — and just one pub selling on the day, for £125,000.
Typical was the Market Tavern, in Penge, south-east London, which attracted a best bid of £325,000 — it's available for £350,000. The overall success rate of the auction was 73%, with the pub sector and vacant property success rates much lower.
Commercial auctioneer Duncan Moir says: "There is a lack of appetite for the pub sector. It is not just a pricing issue, but also a reflection of the difficulties it is facing, and the sentiment at auction is that they are not wanted at any rate."
The only surprise for me is that public auction confidence in the pub sector survived at all after London & Edinburgh Swallow Group (LESG) and Provence went belly-up in 2006.
The two firms sold 500 pubs through this route in less than five years, raising £220m. Buyers bought pubs where LESG and Provence were promising to pay rent for 25 years or more — many received rent for little more than a year or two.
One investor told me at the time that he had concluded this was a marketplace that for a number of years had existed in its own rarefied world, quite apart from the actuality of real values linked to real profits.
JDW reflects state of nation
Here's a difficult subject that I feel nervous even raising. Last week, the Morning Advertiser reported that JD Wetherspoon (JDW) was spending £4m on extra staff to clear tables.
Enterprise Inns tenant Catherine Burnett, posting on our website, said: "As an Enterprise tenant, unable to ever think of competing with the cheap booze and food offering of JDW, it has always been beneficial for us that they fall down on the basics. I have visited our local Wetherspoon a couple of times in the last year and the beer and food are what you'd expect from this sort of group.
"However, poor service, dirty tables, poorly-trained, stressed staff [are] the price you have to pay for cheap booze and food."
Another poster, William Taggert, asked: "How about clearing all the riffraff out at the same time?"
There's no doubt JDW's service can be variable, but are some of its customers unwanted by other licensed retailers because they can't behave?
There is a kind of snobbery you regularly hear about a segment of JDW's customers. But it's the kind of snobbery you sometimes hear about a swathe of the UK population. The British pub has traditionally been the first port of call of the drinking man. At JDW, you see these drinkers' ranks swollen by bargain-conscious pensioners, the unemployed and budget-focused families. At the Crosse Keys, in the City of London, and other JDW pubs, there are plenty of banking and finance types.
It's JDW's strength that so many segments of the population feel happy enough drinking and eating together.
Time will tell for food outlets
A timely reminder from Panmure Gordon analyst Douglas Jack of the quantity of investment piling into the eating-out market from the restaurant sector.
Supply increased by 5% in 2007. Jack reports that the 12 largest operators are expected to open 200 restaurants in 2008, versus 220 in 2007, due to returns from new openings remaining high.
Let's not forget Mitchells & Butlers alone is on track to open 50 new Pub & Carvery sites this financial year. At an average of 3,400 covers per week, this investment alone will grab just over nine million meals a year.
As the economy seems destined to remain in the grip of a slowdown, you wonder whether the winners and losers will emerge more rapidly than might otherwise have been the case.
Taste of summer at Sheraton
Hotel group Sheraton appointed the world's first-ever chief beer officer (CBO), Scott Kerkmans. After a year in office the resident CBO is now seeking help and is in search for a Best Brews summer intern.
Kerkmans is looking for an intern above the age of 21, with a love for lager and a thirst for industry knowledge to assist him with his Best Brews duties including beer tasting, trend research and brewery relations.
As summer jobs go...