AFTER copious high-profile insolvencies and administrations in the leisure sector over the last few years which have included the Sports Café, The Laurel Pub Co (Yates, Hogshead etc), various football clubs and numerous restaurant groups, including a number of outlets owned and operated by TV Chef Anthony Worrall Thompson - as the market begins to settle at the start of 2010, is now the time to call last orders on the redundant pubs?
It's been bleak for many pub companies as their units under-performed and they were unable to rid themselves of these properties as trading entities. However, some of the more proactive owners have taken the opportunity to look at their portfolios, prune back the dead wood and offer the properties de-licensed for alternative use.
Recently, we have seen a number of former pubs, clubs and bars acquired and converted into something new. In North Shields, the former Chain Locker pub was acquired by North Court Developments and converted to 15 apartments. Earlier this year, Sanderson Weatherall sold the former Tow Law Workingmen's Club for development into alternate use and the former Globe pub in Shieldfield has been sold and is in the process of being converted to student housing.
Non-traditional developers are also getting in on the action. The former Junction in Church Fenton, Selby, has been sold de-licensed to an affordable housing provider. Closer to home, there has been interest from alternate users in The Cradlewell in Jesmond which has recently been marketed by Sanderson Weatherall on behalf of S & N Pub Enterprises. This de-licensed pub was offered to the market and a variety of potential purchasers, have taken a closer look, including residential developers, children's day nursery and retailers. We have also recently sold the former Broadway in North Shields for redevelopment as a convenience store.
Perhaps the greatest opportunities at present can be found in the smaller towns and villages where there are perhaps three or four pubs, one performing well and the remaining three barely paying for their upkeep. In such a situation, de-licensing and selling one of these under-performing units could help improve the trade of the others and bring an under-used building into more beneficial use for the local community.
Having said that, not everything is doom and gloom in the leisure and pub world. Well-run pubs with a good operator can still make money even in difficult economic conditions. We have seen several sales of pubs to the in-situ tenant, where simply the change from tenancy to freehold has enabled the operator to improve trade and turn its fortunes around. The Ball Alley in Stanley and the sale of the Trust Inns portfolio which was broken up and sold to a variety of operators/occupiers are great examples of once under-performing pubs trading well under new ownership.
There are, of course, still some operators in the market with an acquisition programme in place. Major pub operators J D Wetherspoon continues on the acquisition trail with a requirement for circa 10 new pubs a year. Whilst these figures are down from their peak, this is still a positive growth aspiration. Marston's Inns & Taverns also continues to acquire sites with a requirement for 15-20 sites per year for new-build pub development in neighbourhood locations.
Smaller regional companies such as Dorbiere Ltd are actively seeking to acquire freehold sites which they can then let to tenants and provide the beer at an attractive rate. This model is designed to make the most of the opportunity to acquire sites at a reasonable price in the current market.
Of course, other operators have their own models that work equally well. The North East's Head of Steam operates with a model encompassing entertainment and high quality real ales from independent micro and family breweries, which is enabling it to build a solid reputation and a growing business with outlets all over the North of England. Some of the independent brewers, such as Fraserburgh's so called 'punk brewers', Brew Dog, (infamous for their Tactical Nuclear Penguin 32% brew, the world's strongest beer) are also taking the opportunity to acquire units and build their own chain of branded pubs.
There is no doubt in my mind that the market has changed and now is the time to call last orders on the under-performing pubs. Whether this is achieved by de-licensing and selling to alternate users or perhaps selling to independent operators who can revitalise a tired 'Red Lion' or put some fresh wind in the sails of 'The Ship' – the fact of the matter remains that there are lots of opportunities in the current market to be had to get a quart from a pint pot.
David Downing is Partner, Valuation and Licensed & Leisure, Sanderson Weatherall LLP