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MARKE T T R MARKE T T R T he news headlines paint a grim picture of pub closures, falling beer sales and declining footfall in the town centre – but we see evidence of a strong and innovative business culture that is producing some notable successes, despite challenging conditions.

The Old Vic, London

In the last three years, for example, we have brokered more than 120 London pub freehold deals for more than £1 million each, seen a number of ex-pubs being converted back into licensed premises and expanded our own business while helping our clients to achieve their business aims.

The London effect London is a magnet for international investment, which has raised the value of freehold pubs, along with other central London property. At the same time, the capital’s cultural boom is boosting takings – in the centre, at least – and encouraging fashionable overseas operators, such as restaurateurs, to stake a claim. Higher trading returns mean that fewer of the large operators want to sell central London stock, reducing supply and pushing up prices even further. Market forces have had a noticeable effect on leaseholds, with tied leases recently changing hands for more than £400,000 in the West End. This is in direct contrast to the rest of the country, where demand for leasehold pubs is weaker.

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AG&G AUTUMN 2013

In the last three years, we have brokered more than 120 London freehold deals for more than £1 million

DIRECTORS

ENDS

Left to right

COLIN WELLSTEAD RICHARD NEGUS JAMES GRIMES ANTHONY ALDER DAVID GOODERHAM

RICHARD NEGUS

“I wanted to work in a smaller company that is passionate about its business and where senior people are hands on – I believe AG&G is the UK’s top boutique licensed leisure agency and I am very proud to be part of the team,” says Richard, who joins the board. “My personality and experience complement and enhance the service that AG&G is able to provide. I share the founders’ values of professionalism and integrity and, like them, always aim to be the best at what I do.”

He brings an enviable list of contacts, having worked for many of the country’s leading multiple and independent restaurateurs, and will be focusing on corporate restaurant disposals and acquisitions, as well as acquisitions for emerging restaurateurs. “Demand for restaurant premises is as strong as it has ever been and the sector continues to attract much international investment,” Richard adds. “It’s a dynamic market where there are many transactions and requests for specialist advice but very few specialist advisors.” “AG&G have an excellent reputation, particularly with pubs, where they are able to open doors that other agencies cannot. I hope to be able to do the same for many of my restaurant clients.”

£ 1M+

Angus Steak House, next to Oxford Circus tube

With 25 years of experience in leisure property and ten years as director responsible for restaurant agency with a national firm of chartered surveyors under his belt, Richard Negus’s arrival at AG&G brings a sharp, new focus to the firm’s work in the restaurant sector.

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Hyde Park Hilton, Bayswater

The flight to quality

Food fights back

Operators unable to keep up with central London prices are looking further afield, with the East End becoming a new centre of gravity. So many properties have gone for development in recent years that there’s a shortage of pubs in the area, which is helping to keep values – and turnover – buoyant. Dalston, Brick Lane and London Fields are doing some of the highest levels of business outside the West End and we’ve even seen former pubs, such as the Well and Bucket in Bethnal Green Road, converted back to their original use.

Savvy pub-restaurant operators are continuing to do a good job, with gastropubs – Brunning and Price and Peach Pubs being good examples – and innovative, food-led, high-volume managed houses (think Hungry Horse and Mitchells & Butlers Crown Carveries) doing particularly well. Today’s consumers are keen to eat out but in some locations are very price-conscious, resulting in a trend towards low-cost, eat all you can offerings – often with smaller plates to aid portion control.

Beyond the lucrative, high footfall properties of central London, the flight to quality shows no signs of slowing down. Tightly-run, managed pubs are doing well, while some pubs in the tenanted and leased sectors are finding it more of a struggle – particularly when the rent was set in more optimistic times. The rating revaluation delay is also seen as a setback for many pub operators. The same factors that are pushing up prices in London are skewing the rental market, driving up rates and premiums to what may prove to be unsustainable levels.

Hungry for premises At the same time, the bigger restaurant chains, such as Nando’s, Gondola, Côte, The Restaurant Group, Tragus and Prezzo, continue to expand, putting further pressure on high-end premises. We know at least one growing business that is forking out 80 per cent of bottom line profit on rent and paying £100 per square foot for a London restaurant – in a basement. Prime West End restaurant sites are riding fairly high on the London boom but there is a lot of churn on less well-situated premises, particularly among smaller operators with less negotiating power. Times are similarly hard for hoteliers. The Olympics are long gone and the return per room looks set to fall in some areas. On the plus side, rising property values apply to hotels too, especially in the capital, so stakeholders have something to smile about.

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These pubs have taken trade from chain restaurants, with pubs seen as more welcoming and accessible, especially for single people. Some chains have also undermined their ability to increase prices and profits by competitive discounting – some restaurants will even take vouchers from other chains.

survival of the fittest Pubs are still sliding into alternative use. When they become available, sites of around 3,500 square feet with the best potential for alternative use are snapped up, while smaller developers are encountering problems with funding and planners are getting tougher on change of use. The Phene in Chelsea is a good example. We sold it more than 10 years ago to a private investor and recently secured it for the fast growing City Pub Company for just over £4 million after the owner was refused planning permission to convert the pub into residential accommodation. Churn at the bottom end of the market, however, shows no signs of ending and a great many pubs will have to find new lives. Even so, the right pub in the right place is still an attractive prospect – we recently sold the Railway in Forest Gate to a pub operator who outbid developers and retailers. The pub survived because the buyer saw long-term potential in being located opposite a future Crossrail station.


Speakeasy, Wembley

Shaftesbury Avenue, WC2

Located just off the High Street in earshot of Wembley Stadium, AG&G brokered the sale of the Speakeasy to a developer for retail use, on behalf of Punch Taverns.

Acting for Shaftesbury, we jointly let the three-storey, 5,000 square foot premises created around the former Marquis of Granby in the heart of the West End. It was finalised at a rent exceeding £300,000 per annum by multiple operators Russell Norman and Richard Beatty, who will run it as the Ape & Bird – a traditional pub offering craft beer and comfort cooking.

Hyde Park Hilton, W2

The Hill, N10

A rent review on the 132-room Hyde Park Hilton on Bayswater Road produced a very pleasing result for the owner, our client London Underground Transport – an uplift of more than 400 per cent. The rent was previously set in 1995 and we demonstrated how much the market had moved on.

We marketed the freehold of this Muswell Hill pub and nightclub on behalf of its major pubco owner. The one-acre site was bought by a developer for just over £4.5 million – there are plans for a new residential-led build.

Duke of York, SW1 Having lost possession for approximately 4-5 years because of upgrade work at Victoria Station, Sprit Group asked us to negotiate a suitable compensation package.

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Angus Steak House, W1 A rent review on the landmark Angus Steak House in Argyll Street, next to Oxford Circus tube, showed that the right restaurant premises in the right location is a prime investment, even today. We secured a 28 per cent uplift in rent for the landlord.


White Bear and Smithfield Tavern, Clerkenwell, EC1

fabric nightclub, EC1

Our specialist expertise came in useful when we helped a private investment fund purchase two tied freehold pubs in central London in an off-market deal worth £3.5 million. The prime properties were previously owned by another AG&G client, Punch Taverns.

We put our market insight to good use for London Underground Transport in a rent review on its nightclub premises in Charterhouse Street. With a 1,700 capacity, fabric is one of central London’s largest clubs – and we successfully raised the rent from £355,770 to £500,000 pa.

White Hart, SE1 Fuller’s continue to acquire prime quality pubs in key London locations and turned to AG&G to add this freehold investment to their estate.

LOND Whitesmith’s Arms, SE1 In the shadow of the Shard, this bijou property attracted wide ranging interest from operators, developers and owner occupiers, which drove the achieved sale price upwards.

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AG&G AUTUMN 2013

Hermes Property Unit Trust

A taste of our 1,500 successes in London

ON

We advised on Hermes Property Unit Trust’s two block purchases of 43 freehold pubs in London (including the Prince in Greenwich) and southern England for £56.31 million. All the properties were leased back to the vendor, Enterprise Inns, for 35 years, producing an initial rent roll of £3.795 million pa.

Grapes Limehouse, E14 Historic riverside pub in eclectic location. Leasehold interest valued for consortium of purchasers led by Sir Ian McKellen.

Bishopsgate, EC2 Gaucho Grill, Bishopsgate: rent review for tenant. Loch Fyne, Leadenhall market; rent review for tenant. No 1 Bishopsgate: letting for LV Fund Management.

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The Cork, Bath • Skilfully renovated Georgian-fronted property in town centre with a number of bars and a substantial outdoor trade patio • First premises bought by Clive Watson and David Bruce’s City Pub Company • We acted for the vendors Midas & Hyland in the £2.725 million asset sale

OUT S I D E LON Loch Fynn, Cambridge

Church Street Townhouse, Stratford-upon-Avon

Oxbridge graduates AG&G is London-based but not London-centric – we do professional work all over the country, as these examples from Oxford and Cambridge show. The Oxbridge connection began in 2004 when Greene King asked us to act in a rent review on the Copa Bar in George Street. We were subsequently asked to renew the lease on The Grapes in George Street – one of the few remaining Victorian pubs in Oxford city centre. We have since conducted a rent review on the Turf Tavern, St Helen’s Passage – one of the most iconic pubs outside central London, with a reputation that far exceeds its size. Our first major job in Cambridge was rent review advice to the landlord on the Fez Club, arguably the city’s most popular late night bar, in 2002. Since then we have undertaken rent review work for an institutional landlord on Bella Italia and the Red Cow. We have also provided advice on a rent review on d’Arry’s Cookhouse and Wine Shop, a lease renewal on the Eagle – one of the oldest pubs in Cambridge – and a rent review on the Loch Fyne restaurant in Trumpington Street, all for Greene King. Another existing client, Nando’s, brought us in for a lease renewal back in spring 2010 – and two years earlier we provided expert evidence for court proceedings in the Kambar nightclub lease renewal.

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• Elegant town centre bar and bistro with 12 luxury letting rooms in 400-year-old building opposite Shakespeare’s school • Sold to Enterprise Investment Scheme-funded City Pub Company • We brokered the purchase for just under £2.5 million


Angel on the Bridge, Henley on Thames

AG&G AUTUMN 2013

Angel on the Bridge, Henley on Thames, Oxon • Famous riverside pub in affluent Regatta town. • We acted in rent review for local charity landlord • Appropriate resolution achieved through independent expert referral

D ON

The Princess Royal, Farnham, Surrey • Four-star inn with fine-dining restaurant and luxury accommodation in leafy Surrey • One of a number of quality inns with letting rooms for whom we have recently completed rent reviews

Pub With No Name, Brighton • Quirky character pub serving real ale and good food in Brighton’s fashionable Hanover district • Freehold bought by a local investor in a deal brokered by AG&G • New owner didn’t want to spoil a winning formula, so kept existing tenants

The Crown, Chalfont St Giles, Bucks

The Old White Horse, Rayleigh, Essex

• Well-known pub and dining room in affluent London commuter town • We marketed the freehold for a major pubco, subject to a tied lease generating rent of £42,000 pa • The Crown was snapped up by a private investor for circa £600,000

• Grade II-listed Essex coaching inn dating back to the 16th century • Subject to planning transaction, so required sensitive handling • Sold to Prezzo for our client, Enterprise Inns

Market Hotel, Reigate

Cabbage Hall, Anfield, Liverpool

• Handsome pub-restaurant in historic centre of Surrey commuter town • We negotiated the simultaneous purchase of the leasehold, from operators Market Taverns, and the freehold, from Reigate and Banstead Borough Council • Our efforts enabled Fullers to secure both interests for circa £2 million

• Well-known traditional pub near Liverpool FC used by several generations of home fans • Badly damaged by fire in 2010 • We sold the freehold for a national brewer off an asking price of £140,000

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AG&G Chartered Surveyors Leisure Property Specialists

8 Exchange Court Covent Garden London. WC2R 0JH T. 020 7836 7826 F. 020 7836 7829 info@agg.uk.com www.agg.uk.com

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