London Town: building a name in the pub trade

Consider the headline 'property company forms pub business' and in these asset-focused times some people picture hostelries being bought to be eventually shuttered for 'alternative use'.

Mark Crowther, former Carlsberg executive and the recently-arrived chief executive of London Town plc, understands this viewpoint.

"There will always be an aspect of our business that will look at alternative uses for our pubs. That said, our modus operandi isn't to buy 100 pubs, shut them all tomorrow and turn them into flats and car showrooms."

Starting life a number of years ago as a residential property developer, London Town came out of the sector in 2005 and saw a future in pubs. Last year it bought 14 freehold pubs located in the South West of England, then owned by property magnate, ex-taxi driver Jack Petchey, now a London Town investor.

Staying the course

While committed to the sector the group won't be averse to cashing in on a pub that has past its sell-by date, but Crowther is keen to stress that having dived into the pub market for the first last year, the ex-residential property business and now AIM-listed pubco aims to stay the course.

"The plan is to grow this as a substantial pub business," he says. Not an asset stripper then.

Crowther says he also understands the concerns of tenants who've seen a succession of owners and the problems this can bring.

"I visited some of our pubs in the North West recently and some tenants there are in their fourth owner in a couple of years. That isn't great. But my background isn't property; it's running pubs, selling beer and food. I've been brought in to create and run a really good pub company going forward."

The group has recently begun to motor. It completed on a 39-strong pub deal a fortnight ago which sees its County Estate-managed portfolio now totalling 225 sites, primarily concentrated in the North West and South West, with more than £100m-worth of acquisition investment. At £77m, bank debt represents around 75 per cent of the group's pub assets.

The big opportunity

With a looming smoking ban in England some people might think it an odd time to be getting into the pub game. But Crowther sees the current environment as a good opportunity, especially for a group like London Town.

"While a few of our pubs will be hit by the smoking ban it'll throw up a lot of new trading opportunities, especially from some of our big food outlets," he says.

The ban will act as a catalyst to revisit a pub's operational quality, he believes, "and there's more to this than a few awnings and an outdoor heater or two".

High on his list of the ban's plusses is the prospect of attracting new people who'd always wanted to become a pub tenant but for whom the atmosphere was a turn-off, "particularly if they had a young family and don't want to live above a smoky pub".

And there's a new bunch of consumers ready to walk through the doors of good pubs that will be smoke free, he believes.

Finding "great tenants" remains Crowther's biggest challenge, however.

"I'm only going to make a success of this if I'm going to populate our pubs with a bunch of people who are really up for it and want to drive their businesses forward and enjoy their time while doing it."

A challenge it certainly is; Crowther says the company has got "a serious number" of pubs out of the 225 total that need new blood, though he can't be more specific.

Plus "there are a few that are shut which shouldn't be, and some are shut that should remain closed and they'll become houses".

While this isn't all about being a property play, Crowther says "we've always been open from day one in saying there are certain pubs that we will pick up as part of these packages [where their future as a pub is limited]".

Change of use

There is a "chunk" of such pubs in the current portfolio where various planning applications are being pursued, and some that have large plots of adjacent land with development potential.

A further 30-odd trading as tenancies-at-will "that we want let quickly because they're good pubs that should be nurtured by someone with talent who can bring in great customers," he says.

And what of the immediate future? "We're in for all manner of deals," says Crowther, "from the five pub packages that we've done, to portfolios numbering hundreds. We're aiming to be pretty aggressive but for the right deal.

Being a well-funded newcomer "which delivers on what it says it will" means some think the group is a soft touch and, in Crowther's words, "will take any old crap".

"We've got some stunning pubs in the portfolio and we've spent around £500,000 per pub. It's by no means a bottom-end estate."