Auction shows strong demand for Punch covenant
A commercial property auction has shown a strong appetite for the Punch Taverns covenant.
British Land sold all four freeholds of pubs tenanted by Punch's managed division Spirit at a public auction held by Allsops Commercial, raising in excess of £5m. Three of the four pubs sold for more than the guide price.
British Land sold the Surrey in Hermitage Road, Woking for £1.4m — Spirit pays a rent of £138,044 per annum so the buyer is getting a 9.86% return on his money. The guide price for the pub was £1.2 to £1.3m. The Three Magpies in Bath Road, Hounslow, sold for £1.74m - Spirit pays a rent of £146,825 per annum so the buyer is getting a 8.44% return on the investment. The £1.74m sale price is substantially ahead of the guide price of £1.4 to £1.5m.
The Five Bells in East Finchley, London, sold for £1.51m - Spirit pays a rent of £117,393 per annum so the buyer is getting a 7.77% yield on the investment.
The guide price was £1.2 to £1.4m. A fourth pub, the Malt Shovel in Bailson, Shipley, which had a guide price of around £975,000, sold after the auction.
A commercial property expert said: "The results are a very strong indication that investors regard Punch Taverens as a very sound tenant, although the yields are higher than might have been seen in the heyday of the commercial propery boom a few years."
British Land acquired 65 freehold public houses from Spirit Group on a sale and leaseback when Spirit was under private equity ownership in 2004.
The purchase price was £174m, reflecting an initial yield of approximately 6.1%. Spirit occupies the properties on 30 year leases without a break and with annual rental uplifts reverting to open market rents from year 15.
