Marston's rips up RPI rents
Marston's Pub Company has decided to scrap RPI rent increases in its new lease on the basis that they create too much rent uncertainty for licensees.
It will opt instead for five-year open-market rent reviews with rent fixed for the whole period before that.
Marston's believes that the current Royal Institution of Chartered Surveyors (RICS) rent-setting review is likely to end with an improved rent-review process that will ensure tenants are not penalised for success.
The move by Marston's is in direct contrast with Punch Taverns and Enterprise Inns, both of which are introducing leases that scrap rent reviews in favour of RPI rent increases.
Marston's tenanted boss Alistair Darby said: "We have been having a big debate over RPI rent increases versus open-market reviews.
"We feel the bigger issue for lessees is RPI — it's entirely sensible for them to lock in their cost base.
"And we think the issue of rent reviews not properly disregarding lessee goodwill is very likely to go away in the wake of the RICS review.
"A non-RPI lease gives a tenant absolute confidence on what rent is going to be over the medium term."
The issue of the sustainability of RPI leases was a major talking point at last week's Pub Company Summit, organised by the Morning Advertiser.
It emerged that London-based Fuller's had capped RPI increases at 3%. Both Enterprise Inns and Punch Taverns are now looking at whether to introduce an RPI cap after last week's conference — RPI is currently 5.3%.
Trade consultant Phil Dixon criticised RPI increases. He said: "Why RPI in the first place?
"Why not index rent to the UK beer index that has fallen for 49 quarters?
"Tie rents to (the beer index), so if that goes down 2%, rent throughout Britain drops 2%. (Pubcos) have really got to address the issue."
Multiple lessee Paul Wigham, who runs Orange Sun Bars, said: "The removal of rent reviews is cited as one of the main reasons for the introduction of (RPI) leases.
"However, I see a darker side to this. We in the trade fought hard for the removal of upward-only rent review clauses and TISC (the Trade and Industry Select Committee) raised this as far back as 2004.
"In one stroke, the pub companies have removed their downside of that concession by applying a format — an RPI increase — that is effectively upward only."
