Monthly Archives: April 2014

Banning the sale of alcohol below the cost of duty plus VAT

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Banning the sale of alcohol below the cost of duty plus VAT – new mandatory condition delayed

Posted: 09 Apr 2014 05:00 PM PDT

Following the proposed implementation of the new mandatory licence condition by way of the Licensing Act 2003 (Mandatory Licensing Conditions) Order 2014 (see our previous article here), it has been reported that the Home Office has delayed the relevant commencement date.

The new date for implementation has been suggested as mid-May but no exact date has been provided as yet.

Morgan & Clarke Monthly Newsletter, some very interesting points on FMT

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MORGAN & CLARKE  APRIL 2014 NEWSLETTER NO. 31

Pigeon House, The Broadway,

Oakridge Lynch, Stroud, Glos. GL6 7NU

Email: info@morganandclarke.co.uk   Phone:  01285 719292

www.morganandclarke.co.uk

(Also at:  London, Cardiff, Braunton, Lewes)

 

We have always subscribed to the basic truism that in life you rarely, if ever, achieve 100%.   This could never be more relevant in the relationships between Pubcos / Brewers and their lessees.   The healthy attitude of a little give-and-take, is the bedrock of a successful business partnership between lessor and lessee.   A quotation from a senior Pubco employee, albeit a few years ago, seemed to sum up the attitude from one side of the fence: “tenants, they’re all the same.  On the make, on the take and robbing us blind”.   When mutual trust disappears, so do sound business relationships, particularly with slightly less successful trading operations.

 

1.  Admirable Admiral

We are grateful to the M&C Report, February 2014, number 169, for an article that you may not have had the chance of studying, concerning an interview with Jonathan Paveley who has only recently stepped down as Executive Chairman of Admiral Taverns, but of course remains Chairman of the successful regional Brewer, Hook Norton.   Two particular quotations caught our eye as follows:

“You have to trust the person in front of the customer – if you can’t trust them, don’t employ them.   In my first six months we dismantled the bureaucracy that existed, saving millions and empowering the front line to take decisions without Head Office interference……poor decision-makers left and the good ones thrived and recruited their equally talented colleagues from other companies by telling them how much job satisfaction they were now getting.   Furthermore, licensees liked it because their BRM was now empowered to help them on-the-spot and we were increasingly accepted as being on their side.   Distrust waned and trust grew”.

 

This highlights our opening remarks concerning genuine levels of give-and-take and to get the optimum out of a given situation.   This is backed up by the second quotation:

“Try to ensure that deals you agree with licensees are fair and will be motivational for them.  I can remember quite a few occasions when a deal agreed with a licensee came to me for formal approval and I sent it back with a lower rent, or other income reduction for Admiral and only one or two went the other way.   We both need to make a good living together over the long term”.  

 

We really could not have put it any better!

 

2.  Purchase the Freehold?

We have had a number of cases recently where clients have sought our advice over the amount that they should offer in the hope of buying the freehold interest.   Time and again, they are encouraged to ‘make an offer and see if it will tempt us’.   Unfortunately – on the basis of this encouragement – there have been a number of occasions where external valuations have been paid for (not through us) and then subsequently rejected out of hand.

 

Please remember that every single freehold asset has a book value to the Pubco which acts as a benchmark as the minimum price to which they would aspire.   The book value is made up of total site income to the Pubco which is in two parts, namely:  rent and what is known as ‘wholesale contribution’.   The latter is the income from the discount that the Pubco retains acting as middle man in the supply of draught and other products.   As a very rough-and-ready guide, if you take the Moving Annual Total (MAT) barrelage and multiply that by approximately £220, you will have a general idea of the wholesale contribution.   That should be added to the rent that you pay and then, depending upon circumstance, multiplied by anything between 9 and 12 to produce the resultant book value.   It is far from an exact science, but does give you a general idea of the zone of relevant values.  

 

Then we turn to the issue of whether or not there is any desire to sell in the first place.   You should always ask well in advance of paying for any external valuations: “is the pub in your core estate?”.    If the answer is ‘yes’, then it is highly unlikely that an offer for the freehold from the tenant will meet with success.   Also, you have to consider the reality of open market freehold value, set against book value.   It is a common occurrence that the realistic open market freehold value of your pub is sometimes under half that which is ascribed to the book value.  

 

The exception to the rule – as highlighted in last month’s Newsletter – is if the property is being purchased for a use other than a public house which may or may not require planning approval for such change of use.

 

If your pub is not in the core estate of your Pubco, then certainly it is worth considering a freehold bid with current interest rates being so consistently low.   As a point of reference, in Enterprise Inns’ last financial year, it has been recorded that they either completed or exchanged on 84x pubs for disposal, generating proceeds of £31m with the telling observation of “a healthy premium to book value”.   Despite the fact that of the 84x pubs sold, the average sale price was £390,047, there were some fairly spectacular sales at levels considerably higher than the average, mainly on the back of change of use considerations.  

 

3.  London Values

Beyond any doubt, London freehold and leasehold values are completely out of sync with the rest of the UK.   Our Director, Simon Clarke, who lives in Battersea, remarked that with terraced houses in his immediate area well exceeding £1m, it is hardly surprising that freehold pubs are generating some fairly spectacular prices.  Similarly, the gentrification of areas that otherwise were seen as being not very desirable, has also pushed up rents, particularly for restaurants, either permanent or pop-up, that are now exploiting what were previously perceived as low rental, suburban areas.

 

A recent survey in the Zagat Restaurant Guide, confirms that the average Londoner now eats out 3.7x per week which is the underlying feature as to why so many new restaurants have been opened in areas that previously were deemed as unattractive.   The net result is that restaurant rents are rapidly rising in these areas, which will have an effect of levelling-out the number of new future restaurant establishments.

 

We have been saying for quite some time – albeit wrongly – that the restaurant rent bubble in Central London is sure to burst at some time.   We were wrong.   The market still marches on with increases on increases, some restaurant rents being well over £500,000 and some site premiums in specific ‘hot spots’ being over a million pounds.    For sure, the bubble will inevitably burst, but it’s anyone’s guess as to when.   Scary!

 

4.  Fair Maintainable Trade and Reality

One of our clients, who was interested in general terms in taking on a regional Brewer’s leasehold, took the trouble to do some research of the other pubs listed on the regional Brewer’s website and compared actual stated turnovers ex VAT with Fair Maintainable Trade estimates.   Fourteen public houses were covered, with the total confirmed ex VAT turnovers being £4,351,287 with an average total sales of £310,806 per property.   However, the interesting point was the declared Fair Maintainable Estimate, which of the same 14, totalled £5,524,050 with an average Fair Maintainable Trade of £294,575.   That made a difference between the actual average turnover and the regional Brewer’s view of Fair Maintainable Trade, of £83,769 per property, or an increase of 21.23%.    There were a large number of the sample properties in generally the same area.   So where does this extra trade come from?   No answer, but it is assumed in every case.

 

Our client is still in discussion over the pub of interest, but on the basis that the current turnover of £202,000 is absolutely maximum with the Fair Maintainable Trade estimate of £286,000 (on which the rent has been based), as being completely unreasonable.   Negotiations continue.

 

5.  The Cost of PIRRS

Acting for a lessee outside of the M25, in a recent Pubco rent dispute, third party determination was sought by the Pubco who elected to have an Independent Expert form judgement via an application to the RICS.   The RICS appointed a London-based Chartered Surveyor – whose account has now been received – for a staggering recorded 30.5 hours at £275 per hour, with a resultant bill of £8,387.50 split evenly between the parties.   Each side has now paid £4,193.75 plus VAT.  

 

This same Chartered Surveyor is also a PIRRS Panel Independent Expert and would have undertaken precisely the same instruction with identical surveyors acting for landlord and tenant, with identical statements of case.   The total cost under PIRRS (for the same Expert), would have been £3,000 as the passing rent under discussion, is over £25,000.

 

We asked for and received a brief time sheet from the Independent Expert to justify the hours that formed the basis of the total account.   Suffice it to say that there was a degree of wonderment as to how the time spent was allocated.  

 

Our client’s question (which we could not answer) was – is the PIRRS fixed fee a genuine reflection of the true fees that should be charged in any event, or were the actual fees that were charged, fair and reasonable?    To quote an old ‘Peter, Paul and Mary’ song…. “the answer my friend is blowing in the wind”.  

 

6.  And Finally

“I’ve stopped drinking – but only when I am asleep”   (George Best)

“What is on a drunken man’s lips, is on a sober man’s mind”  (Danish Proverb)

 

 

Best wishes from the Team at M & C

Email:  info@morganandclarke.co.uk

Phone: 01285 719292

Are Punch Taverns Lessees Deposits at Risk? (Barrel-Dregs 266)

Bad Beer For ExportPunch Lessees Deposits

It would appear that certain Punch leases have it clearly defined that the Deposits can only be used for making up of arrears of Rent and Goods bought through the Lease Tie, the Landlord or his successors cannot swallow up the Deposits.

However you do need to study your Lease and seek further guidance, if it is not clearly defined, a formal request to the Landlord and their successors for Guarantees as to the safety of all Deposits would be a start, if not already done.

If, however the money has already gone, it generates further legal questions?

One BDM was claiming that the Landlord and Tenant Act applied, this is commercial property and the protections that apply to residential property are not always the same, whether the Lessees Accommodation enjoys Residential Status may apply to part of the building and in turn part of the Deposit.

It appears that a possible deal may well be on the way, as of last night and the deadline date has been extended by  a possible week.

My learned colleague is concerned that many tenants Deposits may be left exposed to the vagaries of Corporate Wheeling and Dealing, please ensure that you get good advice and if the temporary problem is resolved that those Deposits that are not Ring Fenced are secured before the next Punch Panic.

Another legal view, should anything go wrong with the Deposits, there should be independent trustees for the deposits, who may be personally responsible for a breach of their fiduciary duty if they haven’t secured the Trust.

Punch Tenants at Risk, should  write Punch (a pro-forma letter) asking for names and identities of the trustees who are managing their deposit, pointing out that the trustees might be personally liable if there is a corporate insolvency resulting in the loss of the deposits.

Potboy West.

The views expressed are not necessarily the editors and www.buyingapub.com accepts no responsibility for them, we do try to avoid offensive or litigious statements being made. They are written by concerned professionals in the industry who feel that these issues should be raised to ensure that all licensees are made fully aware of many hidden pitfalls.

 

Ex-tenant’s fury as Marston’s holds back funds in tie violation row. (Barrel-Dregs 265)

Bad Beer For ExportEx-tenant’s fury as Marston’s holds back funds in tie violation row

By Noli Dinkovski, 03-Apr-2014

An ex-tenant is in dispute with Marston’s for holding back more than £2,300 on his final settlement after the pub company claimed he bought out of tie.

http://www.morningadvertiser.co.uk/General-News/Ex-tenant-s-fury-as-Marston-s-holds-back-funds-in-tie-violation-row

Marstons should be grateful and settle the account as soon as possible.

They have a Tenant leaving, initially without acrimony, not penniless or totally bankrupt, this has to be near first for a company that has adopted the Pub Co Model.

Sadly, these Pub Co’s assume that the Tenants Deposit is theirs for the taking, by any means that is vaguely legal.

We managed to stop one major Pub Co a couple of years ago, where the Estates Manager and BDM, were overheard by a customer, discussing how they could raise the costs to retain the whole of the Tenants Deposit.

A phone call to one of the Directors, who hotly denied such activities, resulted in the Tenant getting back the bulk of her Deposit, which she desperately needed, having realised the error of her ways in taking a Pub Co Lease.

www.barrel-dregs.com does have some useful attributes.

Potboy Midlands

The views expressed are not necessarily the editors and www.buyingapub.com accepts no responsibility for them, we do try to avoid offensive or litigious statements being made. They are written by concerned professionals in the industry who feel that these issues should be raised to ensure that all licensees are made fully aware of many hidden pitfalls.

 

 

 

 

Power Solutions, Changes to the Climate Change Levy

Newsletter No 04
Changes to the Climate Change Levy rate 

 

HM Revenue and Customs have announced new rates for the Climate Change Levy (CCL), which will come into effect on 1st April 2014. CCL is designed to encourage businesses to put more emphasis on energy efficiency.

The current and future rates are outlined below:

 

Electricity

From 1st Apr 2013 to 31st Mar 2014: 0.524 p/kWh
From 1st Apr 2014 onwards: 0.541 p/kWh

 

Gas

From 1st Apr 2013 to 31st Mar 2014: 0.182 p/kWh
From 1st Apr 2014 onwards: 0.188 p/kWh

UK energy security at risk as gas imports surge – Centrica.Andrew Critchlow – Telegraph

 

Gas imports will hit 70pc of supply by 2020, raising the need for new sources of supply.

 

More giant LNG ships to arrive in UK as gas imports expected to surg.

 

Britain must find new sources of energy fast as the quantity of imported natural gas is expected to increase at a much faster rate than the government had previously expected, the chief executive of Centrica has warned.

 

“In primary energy, the UK’s production of gas is falling rapidly,” Sam Laidlaw has told an international energy conference in Houston. “North Sea oil and gas output has fallen by 38pc over the last three years. By 2020 we will be reliant on imports to meet 70pc of the country’s gas needs. So when it comes to security of supply, there is a pressing need for solutions.”

Keep up to date with all the latest energy news on Power Solutions UK website, updating all the energy news every 15 minutes.

 

 

 

Customer Testimonial

Hall Livesey Brown -Simon Jeffrey – Partner

 

“I am just writing to thank you for the substantial amounts that Power Solutions have been able to save both HLB and some of our clients on Energy bills and look forward to continued savings as a result of the company’s work in the future.”

 

 

Watch Power Solutions UK video testimonials  

In This Issue
Latest Energy News 

Power Solutions Blog

 

What’s new

 

Customer Testimonial

Blog
A Holistic approach by Justin Hopper of Power Solutions UK 

The world of energy brokerage is an ever competitive minefield for businesses and from the perspective of the consultant one must find more and more ways to be innovative, adaptable and indeed to be different in order stand out.  It is my approach to look at things holistically and go the extra mile as regards maximising cost saving opportunities for my clients and it is this method that brought me great success and satisfaction working with a major international business.

What’s New
Energy Monitoring: 

“With prices on the increase, it is becoming more important for businesses to look at reducing their energy usage as the only sure-fire way to save money on their gas & electricity supply.

 

By utilising our online energy dashboard together with your smart meter, our clients are able monitor their energy consumption and potentially reduce their energy bills by up to 15%, just by being aware and changing behaviours.

 

Power Solutions are continually striving to provide our customers ways to reduce expense and this is the latest and potentially most effective way of achieving this.”

 

Mark Hallows – Sales Manager 

 

 

LED Lighting:

 

Our LED Lighting solutions are guaranteed to save you time and money. Whether it’s to reduce costs through lower energy bills, or to save on maintenance and replacement costs, we can provide the long lasting solution.

 

 

 

 

BUSINESS FINANCE IS AVAILABLE

Finance is Available! And this is not an April Fool!

It’s the time of year where the press and PR companies like to launch fake news stories to raise publicity and for a little bit of a laugh. Last year we were treated to stories about Royal Mail training owls to deliver mail, and the launch of a Tesco Value 3D food printer.

So we are aware that on today of all days, you may have raised your suspicions about which stories are true and which are fabrications. However, what we want to tell you is 100% true.

BUSINESS FINANCE IS AVAILABLE!

Even though we read every day about how the banks aren’t lending, about how the economy is in a mess, about budget reductions and cutbacks, we know the truth – that finance for small businesses and entrepreneurs is available. Just have a look at some of the deals which ASC have secured finance for recently:

· We helped a couple who own and operate two cafes to buy their first commercial investment property for £315,000

· ASC arranged £1.8 million of bridging finance for the owner of a mixed equestrian and livestock smallholding to purchase a similar property

· ASC successfully arranged finance of £730,000 to repay a development loan for a block of ten flats

· We recently raised £154,000 for leaseholders to purchase the freehold title to their post office premises and the adjoining house

If you are surprised by this, you shouldn’t be. With over 40 years’ experience, ASC know which banks are lending, so a small business owner or entrepreneur can obtain the right finance for their business. If your clients are looking for business finance, we at ASC would love to talk to them and listen to their business ideas. To find out if ASC can assist in arranging finance for your clients, contact us today.

Henry Ejdelbaum

ASC Finance for Business

www.asc.co.uk

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