M&B considering Real Estate Investment Trust

Mitchells & Butlers is giving "serious consideration" to converting to a Real Estate Investment Trust (Reit) in order to unlock the value of its property assets.

The company said it had received a proposal from R20, Robert Tchenguiz's investment vehicle, in respect of a demerged Reit structure, "the attractiveness and feasibility of which" it was now exploring.

It said the proposal would include R20 procuring a fixed price underwriting in the region of 25% of a wholly demerged Reit, which would offer shareholders the option to realise part of their investment in the property company for cash.

The group said it was currently reviewing the details of the underwriting, the ability to reorganise debt and the implications for pensions, tax and legal structure before progressing with the proposal.

The move towards a Reit conversion comes after the company's planned £4.5bn property joint venture with R20 was postponed earlier this year due to the instability in the credit market. M&B said that the current post-tax deficit on the hedges taken out against the planned transaction had risen to £180m on a mark to market post-tax basis from £155m.

However, it said it remained "committed to a property-based refinancing". M&B said that given the continued focus on the value of its estate, it had completed a revaluation of its fixed assets, which gave its properties a revised value of £5bn, representing a net increase of £1.1bn.

News of the company considering to apply for Reit status came as it reported a 3% increase in like-for-like sales for the year to 29 September 2007.

However, it reported a slowdown in trade for the seven weeks to 17 November, with like-for-like sales up 1.4%. It said it had seen a material improvement in the three weeks to 17 November with like-for-likes increasing 2.4% helped by the launch of its new winter menus.