Pub companies must share the pain

By Martin Roper

- Last updated on GMT

'Business closing' burden: 'the prospect of coming out of this with considerable debt, largely as a result of substantial rent arrears, doesn’t bear thinking about,' Martin Roper explains
'Business closing' burden: 'the prospect of coming out of this with considerable debt, largely as a result of substantial rent arrears, doesn’t bear thinking about,' Martin Roper explains

Related tags: Rent, Pub companies

Multiple operator Martin Roper has found himself caught between four different landlords in the debate on pub rents.

Here he shares his thoughts with The Morning Advertiser​’s (MA​) readers on the rental situation following Admiral’s recent announcement:

There were some very noteworthy items and comments in MA​’s Weekender​ mailer yesterday, that particularly struck a chord with myself as an operator of four sites with different landlords (Punch, Marston’s, Ei and Tavern Propco), who is struggling with the concept and reality that pubcos insist rent will remain due during this period of ‘forced’ closure. 

The prospect of coming out of this with considerable debt, largely as a result of substantial rent arrears, doesn’t bear thinking about.

We made payment to all 57 staff on 5 April for work in March and, having had no revenue for the weeks prior and some payments to creditors made during this period, we were financially wiped-out. We were left with a meagre £1,000 in total (across all four sites). The furlough money that has promptly arrived is retained to pay the staff again in just nine days’ time.

Burden of arrears

Trying to kick start the businesses will be challenging enough, with many creditors well overdue, without the heavy and potentially “business closing” burden of huge rent arrears that, although we have been told will not be called-in immediately, at some point will become due.

The thought of a loan (for which the criteria is just as strict as any business loan: two years’ worth of accounts, full aged creditors list, cash flow forecast for 2020-2021 and a business plan) would only burden us with yet more debt so it’s not an option.

We have received grants at just two sites (£25,000 at the Exeter Arms in Derby and £10,000 at the Devonshire, Belper), the Crossing in Burton and the Rectory in Chesterfield do not qualify for grants as their rateable values (RVs) are over £51,000. 

This money was immediately swallowed up paying creditors, albeit in part, who are local and don’t have deep pockets themselves. These are the suppliers we will need as soon as we are allowed to reopen, such as Dancing Duck Brewery, Derby; Owen Taylor butcher, Alfreton; Zest fruit & veg, Derby; and Shaun, the local fishmonger.

Good moves by Admiral

I note that Admiral Taverns has said it will begin charging rent to tenants from May (having said no rent will be due from 21 March to the end of April), based on the grants it has received. I think this is fair enough. 

Businesses that don’t qualify for a grant (RV above £51,000) will continue to pay no rent and no charges. Brilliant. 

It has also stated tenants who have received grants will only be charged a portion of their rent. Brilliant. 

It is only right from a commercial and moral perspective that the large pubcos bear some of the brunt. Chris Jowsey has made it quite clear and I quote: “We want operators to come out of this motivated and energised, not feeling overburdened with debt.” Buy that man a drink when the pubs reopen.

I speak for thousands of tenants. We need some tangible relief from rent for the period of forced closure. We do not want to take on debt to satisfy their rent demands so they can continue satisfying shareholders, keep their BMW X5s and maintain their lunches at The Ivy. No way.

This poignantly brings me to my points:

  • Any grant money should only be used, in part, to satisfy rent but, for the most part, used for utilities, suppliers, service providers and to enable operators to kick start their businesses on reopening, so we can get back to some semblance of normal trade and do our part to get the economy moving again. “Pubcos, leave those grants alone!” (to the sound of Pink Floyd’s Another Brick In The Wall​)
  • Landlords need to give some rent relief to tenants, either using the grant receipts as a benchmark (Admiral Taverns) or devising their own system 
  • The pubs code adjudicator (PCA) needs to reduce the threshold of 500 pubs, covered by the pubs code of 2016. I, for one, have a pub with Tavern Propco, which purchased 370 pubs from Ei in 2019. No small business by any stretch of the imagination. There will be more pubcos that establish a portfolio of fewer than 500 pubs in order to operate under the radar of the PCA. The PCA must also put more pressure on the remaining five pubcos, which have all remained quiet since the PCA asked them what they will be doing to support tenants on 6 April. Only Admiral Taverns has pre-empted any calls on the pubcos by setting out its stall regarding rent on two occasions

The Government will, no doubt, be under pressure to provide grants for those with an RV over £51,000. I know there are many. I have two.

The pubcos would love this, it would further justify their charging of rent. I, unfalteringly, believe the pubcos must bear some of the pain.

The Government could assist in other matters relating to business rates, VAT, PAYE, tax, etc. bearing in mind the fact that Professor Chris Whitty made the gloomy prediction last week that social distancing is likely to remain in place for the rest of the year.

Related topics: Other operators

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