Sale and lease back
The mechanics of a sale and lease back are simple, a pubco will buy the freehold and the vendor retains the pub on a lease. This generates an immediate release of cash to purchase a dream home abroad, invest in the business or buy another pub.
Pub companies are changing and becoming much more flexible. Whilst some product ties do apply, the product lists are surprisingly extensive and include many cask ales. In some circumstances, discounts offered can exceed levels individual free traders achieve and on a wider range of beers, products and services.
Sale and lease back case study
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John Moran of the Beer Engine in Wigan is one individual who has capitalised on a sale and leaseback with Punch Taverns. John owned the Beer Engine for 10 years but wanted to raise some cash as his business partnership had dissolved.
“The great thing about Punch was that we sat down and thrashed out a deal face to face. |
We agreed a rent that fairly reflected the turnover of the business and the discounts given on my beer supply have resulted in increased retail profit”.
Pub Companies are also happy to commit additional investment. As part of the deal with John, Punch invested £60,000 on improvements in the pub.
“Punch’s approach to the refurbishment was excellent... on the day of completion, only 4 weeks after we agreed the deal, their in-house team started on site and I was kept involved throughout the refurbishment. The best thing of all is I still feel like a free trader as I can run the business how I want to, but have the benefit of the support and advice of the Business Relationship Manager from Punch when I need it”.
Customers don’t even have to know anything’s changed, to the outside world, it’s business as usual.
The additional benefit of a sale and leaseback is the lease can then be sold at a later date by way of an transfer. The average transfer premium currently paid for a Punch lease is £90,000. However, as much as £285,000 has been achieved in the last 6 months.
You can find more detailed information about running your pub with Punch through our 'Find a Pub' section available from www.punchtaverns.com. Topics include entering with Punch, the Punch retailer agreement and Punch support to name a few. |
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