City Diary: 2 October

Talk about Walkabout leases​

A couple of the Walkabout leases being sold by Christie+Co have seriously scary overheads. The Walkabout in London's Shaftesbury Avenue has a rent of £937,077. The site boasts sales of £2.579m net of VAT and Christie+Co is looking for a premium of £250,000 for the 29 years left on the lease. Second in the high-rent stakes is the Edinburgh Walkabout/Jongleurs, with a rent of £350,000 on a site turning over £1.923m — buyers can pick up the lease for £30,000.

Fowle gets the lion's share​

Sign of the times: the new 44 Whitbread sites that moved over to Mitchells & Butlers (M&B) a fortnight ago will nearly all pass to Adam Fowle's pub restaurant division. In fact, Mike Bramley's pubs & bars division gets just a single Sizzling Pub Company conversion. M&B will spend £20m converting the venues with Toby Carvery, Pub & Carvery and Harvester getting the majority of sites.

Harvester feels effects of Rogue​

Harvester is the Mitchells & Butlers (M&B) brand clipped the most by squeezed middle-class incomes. Work is under way, as with Vintage Inns last year, when sales flagged, to revitalise menus to turn the sales chart upward again. But has BBC One's exposé of two Harvesters on Rogue Restaurants clipped sales? "To a very limited extent," says chief executive Tim Clarke, indicating the two Harvesters named in the programme suffered short-term sales dents.

Checking flow across the pond​

Interesting note arrives on City Diary's desk from analyst Charles Stanley Securities. It seems that beer flow and quality- monitoring company Brulines has spotted a gap in the market for its services in the United States. Turns out the US 350,000-strong pub and bar market has no reliable data-monitoring system. Brulines has started a trial with 12 to 15 sites in Denver, Colorado, overseen by an unnamed former Coors brand marketing director. More info is expected at the time of the interim results in November.

Short-sellers in the firing line​

Short-sellers seemed to turn their fire on the pub sector last week. Punch Taverns, according to one analyst, has 20% of its stock out on loan. Deutsche Bank analyst Geof Collyer puts it thus: "Now that the global financial regulators have outlawed short-selling in financial stocks, attention is being turned towards the pub sector again — or so it seemed this week — as stocks have taken a fresh tumble, being seen as proxies for concerns over debt/covenants/property loans."

First Loch Fyne in the City ​

It's all eyes on the first Loch Fyne to open in the City of London this autumn. The site, which occupies a former office block at 77-78 Gracechurch Street, has a rental of £175,000 per annum. David Rawlinson, of Restaurant Property, says: "There was some fairly competitive bidding for the site — but at the end of the day, Loch Fyne was considered by the landlord to be the most desirable tenant."

Gauging the market with M&B​

Progress on sales of pubs on the Mitchells & Butlers disposal lists provides a pretty good test of commercial property market strength, at least in terms of top-end pubs. A total of £100m has been raised from the sale of 70 pubs — an average of £1,428,000 each.

Branson's rent-review battle​

Even Virgin boss Richard Branson likes to keep rent bills down. His Kensington Roof Gardens venue has managed to peg its rent review uplift to 20% — sounds a lot until you hear the landlord wanted a 55% uplift. Christie+Co director Peter Taylor, fighting Branson's rent-review battle, says: "The unique property combined with interesting rent-review provisions made for challenging negotiations, but we obtained a successful outcome."

A pubco share-sale too far?​

Has the sell-off of tenanted pubco shares gone too far? Dresdner Kleinwort's Tim Ramskill thinks so. In his 60-page note last week, he says: "Capital structures of all companies can withstand a downturn; we don't believe Punch needs a rights issue. Given the high probability of insolvency being ascribed to the equity value of Punch Taverns and Enterprise Inns, it's interesting to note that the increase of pub debt credit spreads has been very modest."

S&N sets a strong example​

Full marks to Scottish & Newcastle (S&N) UK, which is swallowing cost increases rather than following other major brewers and imposing a second price rise this year. Must have taken a bit of selling to new owner Heineken in a year when shareholders will scrutinise returns carefully. But with much of the pub trade protected from additional price rises by long-tem contracts, any rise would have punished the independent freetrade and parts of the tenanted trade most of all. S&N stands to win market share and shelters parts of the tenanted trade. So maybe holding off makes sense. after all.

Cask is back — that's a fact​

More evidence of the resurgence of cask ale. Sales volumes of cask ale are up by 7% in the Mitchells & Butlers estate. It helps that cask ale is being sold in a much larger number of Vintage Inns sites, for example — but, says boss Tim Clarke, there's been "good like-for-like growth". "Cask ale and soft drinks are dominating performance. Clearly the area that is struggling is British-brewed standard and premium lagers," he explained. And, moreover, 700 pubs in the estate are now Cask Marque-accredited — an even higher number of pubs than that boasted by JD Wetherspoon: 85% of its 700-strong estate has Cask Marque.

Lucky escape for con merchants' potential supplier​

Last word on Gary Hibberd and Timothy Allen, the Vodka Bar Management directors jailed for six years and three-and-a-half years respectively for conning millions out of a couple of banks — and spending the money on fast cars and luxury Thameside apartments. As suppliers became more wary of them in recent years, the pair took to holding meetings at London's Dorchester. One supplier was warned about their tendency not to pay bills — and insisted on money up-front. The supplier tells City Diary: "Looks as if we had a lucky escape! For us, it was a case of no money, no service. But they did find other mugs to do repair and servicing work for them."