The arcane world of pub rents
It's all eyes now on Lord Mandelson in the wake of the Office of Fair Trading dismissing Campaign for Real Ale's (CAMRA's) super-complaint.
It's hard to imagine much of an appetite within Government to get involved in re-casting 32,000 contractual arrangements.
The other interesting avenue is the Royal Institute of Chartered Surveyors' (RICS) promise to review the rent-setting process within the tenanted pub sector.
There is a strong perception, rightly or wrongly, that the tenanted pubcos have managed to get their thumbs on the rent-setting scales. Visit a BII rent-review roadshow and you will find licensees in a state of puzzlement about the process with its baffling use of "comparables", which hardly ever seem very comparable.
The RICS report provided a ringing endorsement of the Association of Licensed Multiple Retailers' (ALMR) bench-marking scheme, suggesting that efforts be made to generate much more of this sort of information to enable a really well-informed assessment of costs and trading trends. (The ALMR annual bench-marking survey, now in its third year, was based on information provided by 29 companies.)
It's surely possible to create a more robust informational universe to ensure all parties feel that the system is attuned to the real world, and experiences the full gravitational pull of the marketplace.
One multiple lessee emailed last week to say: "I know of no rental bid on a review where someone has come and said, 'Well, fair maintainable trade (FMT) has clearly fallen 24%.' Yet that fall is our experience in wet-led sites. I think that in an average low-ish price 220-barrel pub, that means £22,000 to £25,000 of profit."
A realistic view was certainly in evidence in the much-discussed recent Brooker case involving Enterprise Inns, where the judicial view was that a tenant's bid on rent would be 35% of the divisible balance given market conditions.
As ever, nothing, but nothing, wields the super-fast power of the marketplace. Its realities have driven fundamental change in the way pubcos have done business with their tenants in these recessionary times.
(A survey of 24 multiple lessees carried in today's Morning Advertiser provides chapter and verse on this.)
The tenanted sector still boasts plenty of soaring successes and the challenge now is to reduce the number of clattering failures. Setting the right rent for each and every pub by dint of a better calibrated process stands to help in this regard.
A process that is perceived by all sides to be fairer and less arcane stands to take the heat out of one more big area of the tenant/pubco relationship. With beer volumes in long-term decline in so many tenanted pubs, it will also, while we're talking realities, transfer a deal of the pain to those whose book values for pubs reflect headier days.
