Enterprise Inns in REIT talks with tax authorities

Enterprise Inns is in "informal talks" with the tax authorities to see if it can convert into a real estate investment trust (REIT).

Shares in the pubco leapt nearly 30p - four per cent - to 756.5p today after it said it was looking at whether it could qualify as a REIT "without the need for material restructuring of the business".

Enterprise's chief executive Ted Tuppen said the debate surrounding REITs had "moved forward". People were moving away from the idea of the traditional opco/propco route, he said, which was "not that attractive".

"Why would you sell your income and profit producing assets unless you are going to get a fantastic price?" he said.

There continued to be "many uncertainties surrounding the long-term value arising from splitting the company into an operating company and a property company, not least because value parameters have yet to be established by the market".

Tuppen added that Enterprise's legal and tax experts were meanwhile looking at the regulatory aspects of becoming a REIT, "which required interpretation", and were in informal discussions with the Inland Revenue.

He would not put a time frame on the talks, nor would he predict their outcome.

His comments came as Enterprise announced "encouraging results" for the six months to March 31 2007.

Pre-tax profits dipped two per cent to £149m and adjusted earnings per share rose 15.7 per cent to 18.4p.

Average earnings per pub rose 6.7 per cent to £33,300, thanks in part to a number of disposals, including the sale of more than 760 pubs to Admiral Taverns last September.

With the English smoke ban looming, around 90 per cent of Enterprise pubs now offer outside trading areas. Tuppen said he expected "a handful" of his pubs to suffer badly as a result of the forthcoming English smoking ban.

The group was meanwhile looking to refinance its balance sheet, with the prospect of raising an additional £750m in debt.

Tuppen said the money would most likely go towards the ongoing share buyback programme, rather than large scale pub acquisitions.