Provence sells pubs at London auctions for big profits on the price it has acquired them for by promising high rents. But tenants have complained that its rents can be unaffordable.
Below Provence managing director Paul Kiely, who paid himself £1.94m last year, defends his rents policy
We have a diverse portfolio of commercial properties, which includes a pub estate. It has been suggested that our rents are too high and consequently our tenants are failing to make a success of their business. My view is that the most qualified expert is the market place.
We simply let the market decide our pricing policy. If our prices are too high, there will be no demand. I can categorically state that we lease out on a weekly basis a larger proportion of our estate than any other company in the UK.
We accept that a small number of our tenants are struggling to make a success of their business. However, the rent is only one factor in the equation of making a profit. There are several other factors involved: council rates, NIC contributions, employment costs, PAYE taxes, operational costs, supplier costs and many others. Looking to Provence to apportion blame is grossly unfair.
Unfortunately, running your own business can be daunting, but when things go wrong people should look in the mirror rather than look out of the window when apportioning blame. People often forget that hard work is a crucial ingredient for success.
I believe that the Government should provide more assistance by way of contributing to the rent, exemption from council tax, personal tax and corporation tax and by reducing employer contributions for the first two years of a business.
We have had several cash-flow crises but we don't blame anyone other than ourselves, we simply deal with it.
In relation to the building repairs, our tenants deem the property to be in a satisfactory condition by taking possession. All of our leases are full repairing and insuring and the responsibility is the tenant's.
In respect of the allegation of unhappy tenants, first and foremost, happiness is nothing more than a state of mind. It comes from within, regardless of external circumstances. I have witnessed people in tragic circumstances being happy.
We will, however, allow forfeiture of any lease, within 28 days. Where any tenant is unhappy or aggrieved with his Provence contract without any form of penalty, we will release them from their obligation under the contract.
The Provence investment
We provide solid, high-yield investments. We have an unrivalled reputation within the property investment sector. Our investors range from private individuals to private-equity funds and pension funds. We have an exemplary trading history and in more than seven years, have never defaulted under the terms of our lease backs. We have enjoyed excellent working relationships with more than 180 investors and are 100% committed to safeguarding their investments.
We appreciate that sustainability is the key to greatness and we have several other income streams to compensate for any shortfalls in any particular rental market.
In the unlikely event that any investor is dissatisfied with his purchase we will buy back any property at the sale price to our investor within 28 days of this article.
In respect of my personal salary, I believe this is a private matter. The monies have been reinvested into Provence, another sign of my commitment, I feel it further supports my case. It proves that one doesn't have to be particularly talented or gifted to earn a huge salary. One simply requires determination, passion, work ethic, commitment, discipline, sound principles and a positive attitude. I can't wait for this year's bonus.
My advice is: read the packet, understand the contents, and decide if the packet contains what you want. If you want what is in the packet then pay the agreed price. If you do not, then don't! You get what is says on the packet.
You get a 28-day, no-quibbles, money-back guarantee. If you are dissatisfied with your purchase, because you have changed your mind, then we will refund your purchase price, subject to the return of goods. What more can we do?
We will continue to offer our unique opportunities for both the investor and tenant alike. We will not crumble under pressure to replicate the restrictive offerings of the big pub companies, only to be swallowed up by them. The Morning Advertiser can throw stones at us, but we will continue to use them to strengthen our foun-dations. On a positive note, for the few com- plaints that the Morning Advertiser managed to dig up, there are literally thousands of people who benefit from the successful trading of the Provence Group.
How the figures stack up
The following compares a Provence tenancy with a typical pub company tied tenancy. The figures illustrated were obtained from particulars contained within the Morning Advertiser on 3 November 2005.
We are actually £125,00 to £317.31 per week less than a typical pub company on the weekly premiums, plus you still need the initial capital.
In any school of business the Provence deal is more conducive to success!
Provence rentPubco rentPubco rentPubco rent
Premium£0.00£65,000.00£79,950.00£165,000.00
Average term7 years10 years 10 years 10 years
remainingremainingremaining
Cost per week of premium£0.00£125.00£153.75£317.31
Cost of barrels at
4 barrels per week £560.00£760.00£760.00£760.00
Rent£860.00£778.85£568.46£692.31
Total£1,420.00£1,663.85£1,482.21£1,769.62
Morning Advertiser survey reveals scale of sale activity
by The PMA Team
A survey by the Morning Advertiser of UK auction houses has found Provence has sold 82 pubs at auction in the 12 months or so since the start of November 2004. The combined value of the pubs is £35m, with an average sale price of around £430,000 each. Provence has also sold four pubs prior to or after auctions. The company's financial year started on 1 November 2004 so the auction activity is an indication that the company's £22m turnover for the year prior is likely to have increased markedly.
Provence has also sold four pubs prior to or after auctions. Some 76 of the pubs sold through auction are in England, with another six in Wales. Provence has been using all of the major London auction houses to sell pubs.
The Morning Advertiser survey shows at least two Provence pubs have been sold on by private investors during the year.
The Queen Victoria in Thorpe St Peter, near Skegness, Lincolnshire, was bought in December 2004 by a private investor for £430,000 thanks to a leaseback to Provence with a contracted rent of £50,000 per annum, producing a yield of 11.6%. Two months later in February this year, the Queen Victoria was sold on to another private investor for £530,000, a yield of 9.5%.
A second pub, the Lodge in North Tuddenham, near Dereham, Norfolk, was bought by Provence for £330,000.
It was sold by Provence at auction in June for £630,000 after a £35,000 investment, with a lease to itself with a rent of £60,000 per annum (£1,115 per week), a yield of 9.5%. Four months later in October, the private investor who owned the pub sold it at auction for £675,000, making a £45,000 profit.