Time please!
S
adly, more and more pubs are closing down every year. According to the British Beer and Pub Association, 52 pubs a week are closing down – that’s 2,377 in the twelve months to
July 2009 – and many never reopen as pubs. But a ‘dead’ pub is a property opportunity – and it is interesting to see how former pubs are finding new uses as residential or commercial property. Gavin Sherman, Managing Director at Paramount Investments, says that most of the pubs that Paramount is selling today are for alternative use. “Only 20 per cent of the pubs we sell are for pub use, and probably closer to one in ten,” he says. “90 per cent of what we sell is set for alternative use.” He believes the nature of pubs coming on the market has changed over the past few years. He used to see a lot of boarded-up pubs that had failed to find tenants – it was only once every other avenue had failed that pubs were being sold off. Now, more of the pubs coming to the market with Paramount are still operating.
10 per cent yield – or sold!
Gavin Sherman says “We’re seeing a lot more places that are still being run as pubs, but are coming to the end of their economic life – not so many dilapidated, boarded-up pubs. We’re selling some now that have got tenants in, but the brewery isn’t making enough money out of it.” He points out that if a brewery is only making £5,000 a year on a pub worth £200,000, it could make more money putting its cash
‘Only 20 per cent of the pubs we sell are for pub use, and probably closer to one in ten,’ he says. ‘90 per cent are set for alternative use.’
GAVIN SHERMAN MD PARAMOUNT INVESTMENTS
58 MARCH 2010 PROPERTYdrum
£600,000 +vat
PARAMOUNT INVESTMENTS
The Barnaby, London SE15, 6,555 sqft. Freehold pub for sale with full planning for demolition and redevelopment to create a four storey block of nine residential units.
in the bank – even with current low interest rates. A good pub ought to yield 10 per cent – below that, brewers and pubcos are beginning to weed out their portfolios. The action brewers are taking can be ruthless. “We’ve got 300 pubs on the market from one brewer at the moment,” he says, as the bottom end of the portfolio is churned out. Pubs were selling at high prices two or three years ago – but valuations have fallen. Gavin Sherman believes that, historically, brewers have overvalued their pubs. Many are still on the market at unrealistic prices, he says; in some areas, for instance where a pub originally supplied workers at industrial businesses that have moved away from the area, there just isn’t any value to a pub in its current use. But he says events in the sector in the last year or so, and particularly the pre-pack administration of Admiral Taverns, have pushed prices down. “I’ve seen from 2.5 per cent to 50 per cent price reductions,” he says; “the average is around 20 per cent.” Neil Morgan, head of pubs at Christie & Co, who sold one pub every week in 2009, says that the pubs market in the last couple of years was stymied by the high prices sellers were demanding. But we are now seeing more cases where, “the expectations of the seller are being being matched by the aspirations of the buyer”.
Andrea Kirkby considers a closed pub to be no bad thing. It’s a property opportunity.
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