Inns Remain Firmly In Demand
Paul Davey, Managing director, Davey Co explains how the middle to top end Inn and Pub industry is still thriving through uncertain times
We anticipated a challenging Summer season for pubs and inns sales this year, having kicked off with seemingly endless, visceral and highly contentious campaigning in the EU referendum. The top down, internationally co-ordinated doom laden campaign of Project Fear clashing relentlessly with the bottom up campaign conducted by the Leavers resulted in an understandable pause in front end activity in the market. Nonetheless, once the outcome of Brexit was known we experienced a speedy return to business as usual.
The resilience of the mid to top end pubs and inns market ultimately shone through. The allure of multi faceted inns offering depth of trading potential with good dining, bar, accommodation and outside trading facilities offering scope for weddings, events and functions to build upon core a casual trade, set within characterful properties in good demographic trading locations, continued to drive demand throughout the summer period with excellent returns secured for sellers.
The cream always rises to the top
Notably, there has been no specific geographic concentration or exclusion in demand for any particular city, town, county or region. Moreover, demand is for quality; a solid existing trading platform and clear potential for further growth of the subject business.
As exclusive property advisers to the MA500 Business Club, comprising the top 500 small, privately owned multi site pubs and inns operators throughout the UK, we are uniquely placed to know who is looking for what, where and why. The majority of the MA500 have less than 10 sites with many looking to acquire more. Specifically, typical acquisition criteria includes a good cask ale and bar trade, dining for 60 plus, 4 or more letting bedrooms ideally with potential to add more, outside trading areas, all contained within characterful premises. Towns, market towns in particular, good suburban, village and destination sites are all in scope.
Whilst the plethora of new multi site operators has proved an enduring feature of the market we have also witnessed strong demand from single site owner operators looking for their next challenge. In the lending market the primary and secondary lenders have been augmented by private financiers. Again, the better end of the pubs and inns market is proving highly attractive both financially and profile wise.
The leasehold market, most particularly where an option is granted to acquire the freehold interest within the terms of the lease, has proved exceptionally popular. Again, Davey Co have been particularly active in this area of the market, advising freehold owner operators on what to do and not to do in the creation of new private leases to satisfy demand. For competent operators acquiring a lease is far less capital hungry, allowing for greater financial investment in enhancing the trading facilities, improving the operational offer and marketing the business. Incentivised by the potential to acquire the freehold property once the site has proved its value to the operator is a very compelling enticement. The key to this for sellers is, of course, the selection of the right lessee in terms of credibility, financial covenant and demonstrable competence to deliver upon a sensibly worked out business plan.
The “off market” is right on target
For both buyers and sellers the opportunity of achieving their respective aims “off market” is another area in which we have seen huge growth. The risks to would be sellers associated with open marketing can be too much to contemplate and for good reason. Staff, customers and competitors getting wind of your intentions to sell can be catastrophic to some businesses. Conversely, the appeal to buyers of being able to access opportunities which are not openly for sale is always highly attractive. Davey Co Confidential specifically addresses demand for this and continues to prove highly effective in achieving results by employing a sniper shot approach to the correct target market.
So, for all these fine words of the market what about some evidence of our success this Summer. Here are some fine examples covering all aspects of the market I have been talking about. If you feel Davey Co could provide something for you, buying or selling, please contact me directly at paul@daveyco.com or call our head office on 0115 962 2906.
Paul Davey, Managing Director, Davey Co
