SALES of freeholds have been achieved throughout the last 12 months, albeit at much lower volumes than in previous years.
Buyers have had to rely more on their own resources rather than mortgage finance as lenders’ loan to value ratios have retracted from 70% plus to 60% and under.
Freehold activity was partly due to many thinking that the market had bottomed and that the time was right to buy.
It was also due to pubco disposals, some of which have offered very attractive terms to sitting tenants.
These disposals can provide excellent opportunities for sitting tenants who will have the advantage of knowing the pub well, knowing its potential and who can readily see the changes a purchase will bring to the bottom line with the removal of rent and product tie.
Moreover, they will be often best placed to know what investment is needed to increase trade and profit.
As ever, the track record of the borrower is key to achieving finance and, at present, a track record with the lender from whom you wish to borrow.
By contrast, the leasehold sector had a varied year in 2009. At the bottom end, the combination of lower trading volumes and profit, historic rents which were too high for the current level of trade and difficulties with the cost and availability of finance meant the effective demand for many outlets was negligible.
However, at the top end, many leaseholders particularly in city centres have traded at high levels and margins and record high levels at that, and have had the wherewithal to expand their portfolios and/or invest in their premises.
As for 2010, the level of inquiries increased in the last three months of 2009. With a slight relaxation forecasted in lenders’ criteria, I would expect increased activity in the sector but it will not be across the board.
Nigel Westwood, partner, Licensed and Leisure, Sanderson Weatherall LLP