JDW picks the bones

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Related tags: Laurel pub company, Main street, Landlord, High street, Jdw

JD Wetherspoon benefits from the high street end game, says The PMA Team JD Wetherspoon (JDW) has been, historically, unique in plumping for organic...

JD Wetherspoon benefits from the high street end game, says The PMA Team

JD Wetherspoon (JDW) has been, historically, unique in plumping for organic growth. The acquisition last week of four leasehold sites from Laurel Pub Company was only the second time in its history that it has bought a group of pubs.

The first time was in 2000, when it acquired 10 Lloyds No 1 sites from Wolverhampton & Dudley. The venues were taking just £10,000 a week on acquisition. The company plugged in its value-driven price model and lifted sales to around £25,000 a week within a few years.

With the four Laurel sites, JDW is taking a gamble that its value price offer can lift weekly sales to meet rental obligations comfortably.

JDW has acquired the four sites for nil premium. It's acquired a Hogshead in Weymouth, a Slug & Lettuce in Oxford, a Bar Med in Shrewsbury and a Bar Med in Bournemouth. The Weymouth Hogshead site has the lowest rent of the 10 Hogshead sites in administration, with a rent of just £35,000 per annum compared to the next lowest, in Hull, which has a rent of £50,000 per annum.

The Shrewsbury site carries a rent of £90,000 while the Bournemouth venue has a rent of £113,000 per annum. The acquisitions will create the second JDW pub to open in a number of the towns — and the third in Shrewsbury. The site in Oxford's George Street is the company's first in the city centre — its only current site is in Cowley, Oxfordshire. It has a hefty rent of £170,000 per annum.

It would appear to carry the greatest risk, having had a fairly patchy history. It was discarded by Laurel Pub Company little more than two years after it was a converted from a Yates's — which was also, presumably, underperforming.

JDW chief executive John Hutson told me that the normal fit-out cost for a leasehold site was around £1.1m, so the company was acquiring four sites for the cost of one or two leasehold venues — his best guess on fit-out cost was a "bit more than £1m". The only other material cost is the fees of administrator Kroll.

Hutson admitted the fixtures and fittings had been removed at these sites, which are in varying states of disrepair. It's got to the stage where JDW provides one of the handful of bombproof covenants for a landlord owning a high-street freehold.

Hutson said JDW had moved quickly on the first four venues, with no negotiation on rent levels, because they had attracted a fair amount of interest. Maybe he underestimated its desirability as a tenant.

An assignment to JDW from a landlord who found himself unceremoniously dumped into administration by Laurel Pub Company must be a dream come true.

The company is looking at around five or six other Laurel sites in administration where there is less interest from competitors —there seems to be time here to use the strength of its covenant to win better terms from any landlord lucky enough to have it occupy one of his properties.

JDW is a high-street category killer — it's just that it's been a massive category and it's taken a long time to kill a lot of it.

At this stage of the game, the company has the first pick of another tranche of heavily-invested venues that a former competitor simply couldn't make work.

Caring and sharing

For those of us who find

share-buying a mystery, help

is at hand from an unlikely source — pollster YouGov.

It's launching a new investment fund, YouGov Alpha. YouGov's 250,000 people on "panels" provide unique bottom-up insights on how companies are faring.

These will be used to take views on pairs of target companies, such as, The Sunday Times reports, pub groups Punch and JDW.

The fund will buy shares in the one of each pair it likes, and sell shares of the other.

If the data is right, the fund and its devotees should gain. The only problem lies in how to spot a Punch tenanted pub.

Related topics: JD Wetherspoon

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