Pub group follows Provence business model
Another company is following the Provence business model and is trying to sell pub freeholds to private investors for large profits by offering a leaseback at a high rent.
Penny Lodge Developments, a Burnley-based company incorporated in November last year, has been advertising pubs to investors on its website pennylodge.co.uk. But some vendors have expressed surprise at the increased freehold values and rental levels Penny Lodge is attaching to some pubs.
Penny Lodge has offered to buy the Belgrave Arms Hotel in Helmsdale, Sutherland for £190,000 later this month. The pub has been advertised for £320,000 with a lease that pays a rent of £32,000 per annum.
Licensee Andrew Johnson is selling his pub, the Black Lion, in Llansawel, West Wales, for £225,000. He is below the VAT threshold with a turnover of just £50,000 per annum.
Penny Lodge had submitted an offer for the pub and has been advertising for a tenant to take a 20-year lease for an annual rent of £37,000 plus an initial £5,000 payment for fixtures and fittings - the new rental level would make the pub potentially worth in excess of £300,000.
Now Penny Lodge has informed Johnson it is withdrawing its offer.
Johnson said: "I think investors are getting wary of this sort of investment. Penny Lodge was advertising my pub before they'd bought it. I don't think anyone could make this pub work on a rent of £37,000. I haven't even met anyone from Penny Lodge."
Another licensee in Wales, who asked to remain nameless, signed a 20-year lease on a Penny Lodge pub three months ago. Her takings are £1,400-a-week and her rent is £500-a-week.
Penny Lodge paid £160,000 for her pub - and has been advertising it for £270,000. She said: "The rent is too much."
A spokesman for Penny Lodge said: "We are set to buy the Belgrave Arms Hotel for £190,000 and have sold this property for £210,000 - hardly an abnormal profit.
"As a private limited company we will always try to maximise our profits and apologise to no-one for doing so."
Your CommentsRobert Feal-Martinez via email 12/06/2006"'Why oh why is this allowed to continue. The trade bodies seen incapable or unwilling to stand up and be counted on this as with so many other issues. They should be saying loudly in the press."Don't touch these deals with a barge pole." How can anyone take on a pub grossing £1400 a week pay, £500/week rent. This really is lambs to the slaughter. It's not rocket science. In Wales the GP will be no more than 50%, meaning £700 gross profit give or take. With general overheads running at 50%, that leaves £350 to pay a £500 rent. Come on MA lead by example do not accept ads from companies like Provence and Penny Lodge. Let the BII, FLVA etc have the courage to speak. And to the big Pubco's stop selling your churn to these companies sell them to individuals already in the pubs at a knock down price with a supply deal. At least then your bad image may improve slightly. But finally the DTI Committee needs to do as they promised re-visit this issue do they now not see how wrong they were about this game of monopoly."
