Leasehold pub market "decimated" in 2009

Yes Mr. Allman understandably, seems reluctant to offer the total number of actual completed leasehold sales by his company this year. This would have been a useful barometer, and hopefully accurate, since this would exclude repossessions and leases surrendered in the horrific trading situation licencees are facing. This is unfortunate, since this would have given us an current insight into the decimation taking place 'at the coalface' from his companies perspective. No matter, we will have to wait for the extracted historical information, when it arrives in the public domain via companies house. One hopes that there will be sufficient trading volumes for agents and associated businesses to survive but with a saturated market place, the pubcos set to collapse in the future, together with over half the pubs set to cease trading - I fear this will be a complete impossibility.

Fredrick/Colin - I'm well aware of the word's origins but, like so many other words and phrases, it now has absolutely nothing to do with it's original meaning. The connotations of 'decimated' these days is far more than a 10% reduction and would, as I suggested, be used on any subject where a much more drastic reduction has been witnessed. For example, the next time you see a group of Hell's Angels laughing at a joke, try telling them that they're 'gay' and then see how far it gets you when you explain that "actually, it only means you're of a happy disposition..." :o)

Graham, we know you'll never miss an opportunity for a quick 'plug'. But reporting the value of one other tied leasehold sale you've handled this year doesn't answer the question "How many tied leasehold sales this year?' M&S hardly feel the need to announce every time they sell a suit or Curry's every time they sell a washing machine. But economists are interested in their annual volumes as an indication of what is going on in their respective markets. I do assure you my 'fascination' is only with debunking the stream of endless mis-information we get here. That would apply to any agent, or indeed any source, it's just that you seem to be uniquely highly motivated to put it out there - for some reason!

I am an ex licensee, and it makes me sick to see what the pubcos are doing to this great trade. How someone cannot stop the pubcos from ruining peoples lifes is beyond me.

O Biggles, Graham, but I am a far nicer version of you.

Steve, Decimation originates to "removal of a tenth" and if City observer's prediction "we will see at least 50% licensed outlets disappear altogether" is correct then we will see ~7 such decimation reports over the coming years. So I don't think it's too strong a word at all! If anything it's not strong enough!

An example, if one were needed GA. My ex-Entereprise lease was offered, by them, at £138,500 with a turnover of �500k. Fair to say your £1m turnover lease should've gone for twice as much? Decimated, is a good word for what the pubco has done for the Trade.

Steve, Decimate actually means "To reduce anything by one in ten, or ten percent;" Seems about right.

Now let's see; the word "Decimated" is an extremely strong word and, I believe, should represent at least an 80% drop in whatever it is you're reporting on? So, if there were 10K tied leases before the 'decimation', then a 'decimation'would reflect around 8000 of those disappearing? Anyone any idea on what the real percentage of real closures is?

Oh "Biggles" you do so much want to be me and don't blame you for your high aspirations but you aren't. As for leases, I am reliably informed that they are selling quite well with a strong demand for tied and FOT pubs.

Roger, I am both flattered and concerned by your obsession with me , however I can understand it. As for leasehold completions, they are the flavour of the year , both Tied & FOT. Our highest value tied lease completion The Chestnut Tree, Nottingham, an Enterprise Inns pub with sales of £1million and went for £139ks then FOT The Lytton Arms in Knebworth which sold for £225ks with sales of £750ks. What esle does one want to know ?

Oh no! Ken gets his 'corporate marketing gibberish handbook' out. Another epistle from Ken: "Thirdly life is tough as a tenent (sic) but so it iis (sic) for most mall businesses in this country at the moment (especially those in the customer faceing (sic) sector)". How do I identify a "customer facing" business rather than one that ignores its customers - or maybe doesn't have them at all. This could be just the breakthrough the trade needs!

Ken, I have no 'fascination' with Graham Allman or any sales agent. My only fascination is debunking the trade of "information" designed to foster the interests of those who, in one way or another, profit from the alarmingly high attrition rate of publicans, particularly tied lessees. Graham claiming a lease sale completion if it is the first in 2009 is a very different report of the tied leasehold market than if it brought his annual total thus far to (say) 50. It seems his figures are remarkably selective.

It just shows how "challenging" the market is for tied leasehold assignments, when an agent has to inform us that he is completing on just one single lease sale. No one would dispute Mr. Allman that the odd lease assignment is still taking place. However it is perfectly obvious to all concerned that the market is completely decimated and will remain so for many years to come. It would certainly seem certain that the negligible volume of sales and failures will have a knock-on effect and result in the demise of most agents, pubcos,advisors and other businesses associated with the licensed trade. It is all very sad but of course inevitable. A similar scenario occurred of course in the late 80's - early 90's whereby many agents ceased trading. The difference of course this time, is that this situation and financial climate is massively worse and unprecedented - and of course set to continue and decline further for the next decade. Furthermore the adverse publicity generated in the national press has damaged the trade forever, with the general public deciding the trade has no attraction whatsoever. Those shrewd folk with cash to invest have long since deserted the licensed trade. The already saturated market place has simply too many pubs stagnating on agents and pubcos websites, with just the odd buyer. The indisputable law of supply and demand will always prevail. This of course will worsen next year and thereafter with many thousands more of forced disposals. The churn has now virtually ground to a halt. Many pubs could not become viable even if they were literally given away. As I have stated before a pub is not an essential requirement in the new and changed world, and we will see at least 50% licensed outlets disappear altogether. No amount of spin or rhetoric will change this inevitable outcome. Just to put your sale into perspective perhaps you would like to share with us how many lease assignments you have actually completed on in November and the total for this year to date. Please could you quote actual completions by your company and obviously not surrendered leases and repossessions, in order to give us an accurate reflection on the state of this years licensed property market (from your companies perspective.) Always interesting to hear actual and verified figures from those professionals on the coal face.

Alex fair points made with a hint of realistic thought. There seem sstill to be an overpowering misconception amongst tied tenants. Firstly they are not "the industry" only a minor part of it. Secondly their problems are (the ones most moaned about) are not experienced by the other sectors of the industry. Thirdly life is tough as a tenent but so it iis for most mall businesses in this country at the moment (especially those in the customer faceing sector) Fourthly the Pubco (their landlord) is just that your landlord not your benevolent partner there to save you from ruin. They are theref irst and foremost to protect their investment and their business. Their strategy is not based on feelings or moral sense of fair play but on what needs to be done for survival, their survival NOT the tenants. They will without much worry,dispose of any of their assets (lower end or badly performing pubs) for the best price they can thereby leaving them with a healthier higher performing estate.Their estates are divided in to two (or three) groups. Those doing well, (those performing ok), and those struggling.Those in the struggling sector will always be vulnerable to abandonment and being disposed of. Until tenants grasp this fundimental set of facts of the arena within which they have chosen to operate they will continue to be disappointed by their landlords expected attitude towards their plight. Ken Nason

Roger you really are a master at commenting on specific points in isolation and making a case agaist what others state on that basis. Must be a sign of a weak grasp of counter arguments that drives you to do so continually. The purchsers perception of value is not set by one thing but an overall picture of all of the aspects of the business. The tie, the rent and the cost are just some of the considerations. A business can have an asking price of 0 and make no profit with the potential to make nothing so will attract no interest. On the other hand it can have the same asking pirce but if the buyer spots a prospect of making a profit then his value will be higher.Why do you wonder how many sales Graham has made does he wonder how many you have made? Strange fascination(obsession) you have with your favourite agent Ken Nason

I think this is a very sad situation to be in. I agree with both sides to the 'banta' below. It 'could' be a good time to buy BUT only if you know what you are looking at (in terms of the lease) and have substantial capital to trade for 3 years with no return and a minimal or no income for yourself. I have no ties and and very lucky to be in an area where people can still afford to eat out. I have also had to work very hard to get a better deal on my rent which without we would not survive. I think those who are thinking about a lease so wait, listen, watch and learn as much as possible about the market. Go and get a job in a pub as a bar man/women/cellar man...whatever and experience just how 'rosey' it is. The fact is even with no tie and reasonable rent it is very tough to survive. I can only simpathise with those who have the pub co's to deal with. I strongly agree the pub co's leases will not survive unless they are changed. However, in my opinion this would not be a bad thing. Give the pubs back to those who know how to run them !

The pubcos will have to change to survive. They will have to be more realistic on rents, drop the tie, and be open and transparent. If people could see that pubcos are changing for the better, treating their existing tenants properly, then there may be some hope. If people had more faith in the pubcos, then perhaps, they might looking at Leese's once again.

whatever happens in the next year, i think if people can survive the economic crises,they have a good chance of getting a better deal,if pubcos do survive they will have to change their model,it does not work on the whole,and they are paying the price by so many closures,its all up to the banks now,

Well, if Ken Nason's understanding of the tied lease market demonstrates the sound grasp of economic principles much admired by . . . . Colin Matlock, then surely the purchaser would be offering zero or even agreeing to buy on the basis of pub-plus-cash. Ken has told us that the buyer's expectations dictate the value of the business, so it seems very strange they're not flying out the door. It must be a big relief for Graham Allman to announce a sale. How many does that make this year I wonder?

Of course no one wants to buy a leese anymore, one of the problems, I think, could be the awful publicity that pubcos have been getting. I would have though, that pubcos would do everything they could to try and improve relations between tenants and themselves. After all, it would appear that a lot could be done to improve, if they pubcos wanted it to.

Very interesting, we went bust in January following nil by mouth help from Enterprise and desperate efforts to sell a leasehold we had bought for 65k, the highest offer (which was then withdrawn) was �27k in 2008. As a result our Herefordshire pub is now LAW and by all accounts is now a tip serving bad food. What is really interesting is the FREEHOLD value of pubs - at an average of �200k where do the pub cos get the stellar values of their estates, have they or they backers had a meaningful valuation lately? Can they really cover their debts or are they trading whilst insolvent, perhaps one of their regular mouthpieces could tell us.

Joe you make a sound point, maybe someone can explain why faced with these facts pubco valuers have sought to FMT valautions? All the facts point to a decline whether you choose statistics on beer sales, the smoking ban, the recession etc.These are all factors which point directly to the RICS pubco valuers, who incidently have marked down the estates of the pubcos by an amount which is negliable whilst at the same time raising rents. Over the same time the pubco have raised the cost of tied products whilst the untied market has remained relatively static. It is no wonder there is no value in leaseholds as the arket is flooded with nil premuim ptions. The pubcos have let seasoned publicans go to the wall (who by the way Ken are not idiots as you put it) to replace them with anyone who has the money to give them a deposit and do a one day training course. If only the pubcos worked with their publicans and shared the profits equally then the situation would not be nearly as bad as it is today. The levels of closures are unprecidented.

D, or may I call you comrade?I neither follow nor add to anyones propoganda. Please tell me what matters am I supposed to be helping? I for one would like to bet that Fleuerettes has a better grasp on the property market that the Pub revolution GMB. Just for a laugh d, can the pub revolution please let us all know what is actually going to happen to all of your "followers" in their tied leases when the great day comes and the Pubcos fall. I see very little post crash advice from your good selves as encouragers of the demise. Do you not think it fair to let all of these people know what might be in store for them and their lively hoods in that eventuality, other than undefined freedom and unfettered profits? Ken Nason

Brian, Joe, both sensible and balanced views. Not all black or white. Seems we have mant people posting who have no concept that the trade is actually not just the tied sector and seem to transpose ALL of it's problems to the whole industry. The tied sector is less than half of the total pub sector. Rent and tied cost of purchase do NOT affect anyone else but a minority of the trade.Richard I think that you will find that it is in the depths of recession, or in times of bust (opposed to Boom) that the wise (and ultimately the rich) make their investments for the future. The idiots are the ones who buy at the peak of the boom and then complain that they are in a loss making situation or that they cannot get back the inflated premium they paid whilst scrabbling in their greed to jump on the bandwaggon. So as always in life there are winners and loosers. Why on earth do you think that I would even contemplate running a tied lease pub?Silly man Ken Nason

The tied leases are a thing of the past, no one is interested in them. Sad, but, true.

Paul,nothing naive just a statement based on basic economics. Never is a rather a dangerous statement for anyone to make I'm afraid in the light of there being many leasehold pubs out there that are doing ok in the recession. There are some tied pubs that are not but this reflects the bottom end of the market which has always been vulnerable. Thank's for the title but as I never use one it isn't necessary.Again nothing misleading in what I have posted. Markets ALWAYS change, fact of life. Ken Nason

There is some added irony to this story, anyone running a leasehold pub and managing to pay their rent and still survive despite a tie. A rare breed I know, may be tempted to make their Pubco an offer to buy the property. Will the Pubco sell? Of course not. Why? because the rent is being paid and the tie is operational. So, in order to buy the property from the Pubco you have to let the business fail! Then of course, you have no money and no prospect of financing the deal! Irony indeed.

Completely agree with your posts Paul, S.Bailey and Colin. His posts are totally misleading and at it would appear from his post that he will be the only one "getting the cash out of the mattress and bag a bargain". Good luck to him though. Let us see how he copes with running a tied leased pub in these unprecedented dire economic times. I think he will discover it is completely different from the distant days when he was last a practising publican.

The comments below make interesting reading, however I don't see it as black and white as stated there. Undoubtedly the recession is the main cause for problems with pubs; most of their rents would have been set during the good times, meaning they are now having to operate with bouyant market rents during a downturn. Inevitable then that they're going to struggle. But i don't think it's the end of the road for lease pubs, they still represent the cheapest way in to the trade for people looking to enter it. What has changed, however, is that people are much more aware of what leases are all about and their potential pitfalls. This has got to be a good thing. All the negative press means people will think much more carefully about what they're taking on before signing. Of course, the other reason why so many pubs are failing is that there's been over supply in the market for a while now. Gone are the days where the pub was the default option for where people spent their leisure time (and pound), now you're competing against restaurants, bars, cinemas (not to mention home cinema, games consoles and all the other home entertainment options). People's tastes have changed. There's simple not as big a market as their once was for a 'typical pub' , especially old school community style boozers, which is why so many are going to the wall.

Paul, to damn Ken with the faintest of praise, at least he has a grasp of simple economic principles that you clearly do not. The price of everything is governed by the law of supply and demand and that law is invariably fluid.

Ken not sure if I would be recommending people to buy property at the moment, take a look at what has just happened in Dubai and the stock market this morning, it will surly get worse in the early part of next year before any improvement, its ok bagging a bargain, but will the trade within the unit support you during next year. I'm not that confident.

A lease has no value, other than the inventory at the point that the start of the lease, which is when the rent is agreed based on anticipated profit. It follows that at the fifth year if the profit and the rent are the same as at year one then the lease still has no value other then the inventory. If the pub has done substantially better and the rent for the ensuing five years is left the same because the improvement is all down to goodwill then the leaseholder can sell that extra profit for a premium. If the rent is increased proportionately to the increase in profitability again there is no added value. It is a fact that many pubs now make a profit for the tenant that is lower than the dry lease rent, which means there should be no premium, just the inventory. Similarly there is no value to the lease if the tenant has been earning less than the sum of the wet rent and dry rent. Given the current climate and the way the future trade is looking there can be no justification for a lease premium; that is unless the agent can spin a yarn like "there are roses round the door"

I agree, if its not the smoking ban, its the recession. The reality is economics the pubco's have created this and sadly the industry is paying for it. Anyone who takes on a lease from one of the top 3 pubco's needs their heads testing....very bad business to be in. Furthermore anyone who sells their property through Fleurets need to be wary of high %'s linked to your rent! Crazy world - get out quick before you end up penniless!

Our industry is in such a bad state of affairs that when the economy starts to recover, I do not think that the licensed trade as we know it will. It’s not as easy as saying the pub co’s are greedy, they are struggling just as we are but they should look more closely and try to help us to help themseves because if we do see an increase in sales, which in turn will make a pub more viable there will be none of us left to run pubs in the future. You do not need to buy a lease, there out there for free, the number of empty boarded pubs will rise faster than we can possibly predict.

Paul, you are "Spot on" Ken has no real idea of why the market is collapsing all around, these kind of people who "blindly follow" and indeed add to the propaganda put out by Pubco's are not helping matters, frankly, Fleurets haven't grasped the enormity of the situation yet either! The sooner the Pubco's collapse, the better it will be for British pubs, if these "dinosaur mentality" people, who heap praise on the "tied business model" with no real experience of being on the receiving end of pubco's, don't move with the times, they too will become victims of a rapidly changing culture ! Che Smithers, Pub Revolution, GMB

Ken I have to agree with Paul Black on this one, I usually can see your point on a lot of things, but not on this one, I think you are wrong. It is the high rents and tie that is stopping people been interested in leaseholds. Also, all the negative publicity regarding the treatment of tenants from the pubcos has not helped. No one entering the trade needs to be tied up with pubcos who have proved to be unhelpful to their tenants.

"Decimated" is somewhat a strong and in my opinion misleading description of the leasehold market. Challenging is more to the point , if vendors are willing to "deal" and purchasers willing to offer sensibly then sales are going through. I always say that "a good business is a good business and a good pub a good pub, always has been and always will be". Tied or FOT, its the bottom line that matters. We are completing today on a fully tied lease with 100% wet sales making above £1,000 per week profits after paying all expenses including rent.

Paul, I agree with you. I get sick of hearing it is the recession that is causing pubs to fail. Wake up Ken.

It is the beginning of the end for leasehold pubs, the more pubs that tenants are not able to run viability the pubcos will sell off. Why this has been allowed to get to this state lays at the pubcos door.

Ken how naive. The market will never recover for leasehold pubs unless the rents are considerably lower and there is no tie. For you or any other "trade guru" to say different is just stupid and very misleading.

Well, what else would anyone expect in a recession? Best time to buy and worst time to sell.(opposite of two years ago when it was the best time to sell and worst time to buy) As I said previously, time to get the cash out of the mattress and bag a bargain. To those wanting to sell but unable to all you can do is hang on, survive and wait for the market to recover.