Spirit's new lease deal 'offers lower-risk option' for landlords and tenants

By Ellie Bothwell contact

- Last updated on GMT

Licensee Ian Ridley said the Highlands had been 'in a downwards spiral for some years' before he took it on [Credit: Ridley Inns]
Licensee Ian Ridley said the Highlands had been 'in a downwards spiral for some years' before he took it on [Credit: Ridley Inns]

Related tags: Leasehold estate, Renting, Lease

Spirit Leased’s new turnover-based rent deal has been praised by one operator who says it offers a mutually beneficial and lower-risk option for both landlords and tenants.

Last week Spirit Leased said it would make the agreement the norm for new tenants and lessees as the company looks to move “from the Premier league to the Champions League”. The Joint Venture Agreement, as it will be known, is already in place with 18 operators, and Spirit expects to have more than 50 up and running by the end of the year.

Ian Ridley, managing director of Sussex-based Ridley Inns, took on the Highlands Inn in Uckfield last October under the agreement, which is based on an element of fixed rent plus a percentage share of turn-over, with free-of-tie pricing, no rent reviews and no RPI increases.

Ridley also runs the Cock Inn in Ringmer, Sussex, which is owned by Wellington Pub Company and has a fixed rent, which moves by RPI each year, and a five-year upwards only rent review.

'Safer way of paying rent'

“For someone that has invested pretty heavily as we have, [the new Spirit agreement] is a much safer and better way of paying rent. If we’re successful, they’re successful,” he told the Publican’s Morning Advertiser​.

“You know what percentage of turnover will be paid so it works out effectively from a cash flow point. You’re paying weekly, rather than quarterly in a much larger lump sum.

“When we took the Highlands on it had been in a downwards spiral for some years. Goodwill was fully depleted and it was a risk. So taking a turnover-based rent for both of us was a lower risk option. Neither us nor Spirit knew how the pub was going to take off as it hadn’t performed for many years. It’s taken off like a rocket, so we’re both happy.”

Chris Welham, managing director of Spirit Leased, said: “[The agreement] will soon represent more than 10% of our [433-strong] estate and will be the standard for all new deals — growing at 30 to 40 per year.

“The JV Agreement completely transforms the relationship between the pub company and the operator, as it encourages both parties to talk about growing sales across all categories.”

Related topics: Other operators

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6 comments

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Deals a Deal

Posted by Objective Observer,

Lessee's on new agreements retain those rights.

I believe the last news re merger was that Greene King shareholders had agreed. Not that it had taken place.

In any event according to analysts GK were more interested in the Managed estate brands.

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Seems a strange time to bring in new agreements

Posted by Pirate,

Am I the only person to find it strange that Spirit Leased are bringing in new agreements just as they are being sold to GK? Or me being cynical maybe, but don't they sound very similar to the new GK Local Hero agreements? Just a thought. Will be interesting to see what beers ex Spirit Leased will be allowed to stock once part of the GK estate.

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Indeed

Posted by Trade Stalwart,

Well this is a Spirit pub and GK are buying the estate sign off by Easter? Its an option for GK to dictate the wet offering to their pubs and remove the current Spirit list and product range in favour of their own beers, thats clear as day and a major consideration for the immediate trading future of this pub. I see from web and map searches the nearest pub to them is a Greene King managed house.

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