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In this week's issue... The chef with no name How James Cochran lost the rights to his own name, and his triumphant comeback with Islington restaurant 12:51
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REIT decision could transform pub sector

15 May 2008 by
REIT decision could transform pub sector

The Government's decision to allow Enterprise Inns to convert to a tax-efficient Real Estate Investment Trust (REIT) could lead to the biggest transformation in the pub sector for nearly 20 years, according to analysts.

Last week, HM Revenue and Customs (HMRC) confirmed that Enterprise could convert to a REIT, which allows companies to invest in property that generates income from a fixed commercial rent without paying corporation tax.

The decision could trigger a transformation in the pub industry not seen since the 1989 Beer Orders, which broke the traditional tie between breweries and pubs, and could see a major restructure in pub ownership in the coming years, experts said.

Nigel Parson, analyst at Evo Securities, predicted that corporation tax-free investment in tenanted and leased pub property would attract wider investment in the sector and see a number of pub operators evaluating their structure

Because of the value of the property owned by the "big five" pub operators - Punch Taverns, Mitchells & Butlers, Greene King, Marston's and Enterprise - Parson said that even if they did not initially elect for REIT status, in the end they would have no choice.

In a statement, Punch said that it welcomed the news from HMRC over a potential conversion to REIT status for tenanted pub operators and that it would consider the opportunity on its merits.

Enterprise could convert to a REIT as early as October, according to chief executive Ted Tuppen. Unveiling first-half results which saw an expected 11% fall in pre-tax profits to £132m, Tuppen said he was hopeful the company's plan to transform into a REIT would happen by the next financial year on 1 October.

Last year, Malmaison owner Marylebone Warwick Balfour pulled the plug on a REIT conversion known as Vector because of uncertainty in financial markets.

Read more on Reits at

Enterprise wins REIT status >>

By Christopher Walton

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