Freehold pubs "never been so cheap", says agent

Despite the current economic environment now is as good a time as any for individuals with cash who are looking to buy freehold pubs, according to a leading property agent.

Neil Morgan, head of Christie + Co's pub and restaurants department, said that while the market was tough for many operators the consensus was that the market had effectively hit the bottom, although the big question was "how long will it bounce along it?"

But with the larger operators looking to offload pubs to raise funds to reduce debt there would be opportunities for individuals and multiple operators such as Peach Pub Co and Heartstone Inns to return to the market.

"The private freehold free-house market is back. Pubs at around £250,000 have never been this cheap," said Morgan. EBITDA multiples in the freehold market were now between four and eight times, versus between five and 10 three years ago, he added.

In leased pubs, multiples were now around one times EBITDA versus 2.25 times three years ago.

"Financing can still be an issue for some people but this simply highlights the need to be creative in this area," he noted.

In its annual Market Intelligence review Christies said pub properties had fallen in value by 29 per cent since their peak in the fourth quarter of 2007. While deal activity rose in 2009 versus 2008 levels, "volumes were nowhere near pre-credit crunch levels".

The agent said it expects regional brewers to "pick off pubs" from the larger debt-burdened pubcos in 2010, while it also foresees private equity firms coming back to the market towards the end of the year.

The year will likely see 'debt for equity' deals continue, with banks "exploring exit strategies in two to three years time".

Meanwhile Morgan said his team had had strong interest in seven of the 19 free-of-tie Scottish & Newcastle Pub Company leases it was marketing.