Pub operator Mitchells & Butlers rules out REIT conversion for now

22 May 2007 by
Pub operator Mitchells & Butlers rules out REIT conversion for now

All Bar One owner Mitchells & Butlers (M&B) has become the latest pub giant to spurn the use of a tax efficient real estate investment trust (REIT).

Speaking at the release of the company's interim results today chief executive Tim Clarke said the market for a REIT conversion was "as yet insufficiently developed" to provide shareholders with "sustainable value enhancement" if a pure split between property and operations was undertaken.

In recent weeks fellow FTSE 100 listed operators, Punch Taverns and Enterprise Inns, have ruled out short-term REIT conversions citing similar uncertainty, as has rival JD Wetherspoon.

Instead Mitchells & Butlers is continuing talks with R20, the investment vehicle headed by property tycoon Robert Tchenguiz, over a sale-and-lease-back of the pub its property.

Tchenguiz, who has a 15% shareholding in M&B after a failed takeover bid last June, was described by Clarke as the "most competitive bidder" for the 50% of the pub estate the operator is willing to sell.

M&B said the sale and leaseback of as much as half of its portfolio, valued at around £4b, would yield potential market rent of £270m per year for its long leasehold and freehold pubs.

M&B is reported to have offered a number of property packages to investors in recent weeks with the smallest worth £500m up to £4b at the top end.

In the 28 weeks ending 14 April the O'Neils owner saw turnover rise for by 12% to £995m (2006: £887m) but its pre-tax profits dipped 2% to £89m (2006: £91m).

Average weekly sales per managed pub increased 7.6% year-on-year but M&B, which makes more than half its turnover from food sales, warned the impending smoking ban in England on 1 July was increasing competition in the pub food market while interest rate rises were squeezing consumers' disposable income.

Punch Taverns rules out REIT in short term >>

JD Wetherspoon not to become a REIT company >>

Enterprise Inns mulls REIT as half-year turnover falls >>

By Christopher Walton

E-mail your comments to Christopher Walton]( rules out REIT conversion for now) here.

[The Caterer Blog]( Catch up with more news and gossip on the Caterer Blog here
[Newswire For the latest hospitality news, sign up for our e-mail news alerts.
The Caterer Breakfast Briefing Email

Start the working day with The Caterer’s free breakfast briefing email

Sign Up and manage your preferences below

Check mark icon
Thank you

You have successfully signed up for the Caterer Breakfast Briefing Email and will hear from us soon!

Jacobs Media is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

The highest official awards for UK businesses since being established by royal warrant in 1965. Read more.


Ad Blocker detected

We have noticed you are using an adblocker and – although we support freedom of choice – we would like to ask you to enable ads on our site. They are an important revenue source which supports free access of our website's content, especially during the COVID-19 crisis.

trade tracker pixel tracking