Up close and very personal

By The PMA Team

The tenanted trade is under unprecedented political scrutiny. The challenge is to ensure a fair and transparent relationship between pubcos and their tenants is demonstrably in place.

Proof of the pudding will be that tenants earn a decent profit, stay around for a decent amount of time - seven years or so on average - and report that they trust their landlord. Simple.

For those that were there all day, there was many contributions to show progress is being made.

The day ended in a presentation by pubco critic Greg Mulholland MP, followed by a panel discussion. Mulholland's presentation was so explosive that a long list of questions for panel members were scrapped in favour of discussing his views, some of which we sensible, some of which had passed their shelf life (see Mark Stretton's view).

For those who attended the conference, what must have been a puzzling spectacle to witness was the extreme personal enmity between Mulholland and Enterprise boss Ted Tuppen.

Mulholland suggested Tuppen should quit on account of the damage done by his "aggression and denial". Tuppen pointed out that Mulholland was "making stuff up".

There was a particular clash over figures. Mulholland claimed that £50,000 a year per pub is spent servicing pubco debt and special support for tenants worked out at around £2,000 per pub.

The figures, in Enterprise's case, are plain wrong. The debt-service figure per pub is £30,000 while the special help per pub figure for 3,000 Enterprise pubs in the past two years is £10,000. (Mulholland would say that his figure is the averaged-out-across-the-industry-figure).

Last week's conference was the first time Tuppen and Mulholland had actually met face-to-face. Perhaps not surprisingly, there were fireworks given that discussions in the past have often been conducted through solicitors.

Mulholland went far too far in suggesting the trade would benefit from Enterprise's collapse. I'm not sure what Enterprise shareholders in his constituency would make of their MP hoping their investments are rendered worthless.

For Enterprise's part, the hostility that was on show from Mulholland is "reap what you sow stuff", a reflection of wrong-headed public relations in which communication with Mulholland has been conducted through solicitors - a mug's game.

The broader danger is that the personal static between Mulholland and Tuppen/Enterprise Inns means that the positive steps that have been taken in the tenanted trade go unnoticed.

Certainly, Mulholland was woefully off-the-pace in acknowledging the changes that have been made in addressing key issues in the past 12 months.

The day-long conference was focused on real progress that's underway across major companies and with industry initiatives such as the low-cost rent dispute resolution scheme.

I've spoken to a lot of people who attended last week's conference to ask them what they really thought about Mulholland's broader criticisms. There is consensus around one criticism in particular.

He pointed out that RPI-only leases, with no rent review, on offer now from the large tenanted companies, is an an upwards-only rent review by another route. The tie can only be defended if it creates a proper alignment between the economic interests of landlord and tenant. It should mean that tenants have their chances of succeeding increased by the tie.

The imposition of RPI increases in medium-high inflationary times means that the pubco is guaranteeing itself earnings growth, more than likely at the expense of tenant income.

Is this setting the framework for a sustainable future? Or will swathes of licensees need to ask their landlords to re-balance incomes in future years as a result of RPI compounding?

It is significant that Fuller's, where average tenant tenure is currently an industry-leading six years and one month, capped RPI at 3% a whole six months ago. It's certainly a gesture in the right direction.

To be fair, Tuppen acknowledged at last week's Morning Advertiser conference that capping would be sensible.

Significantly, Marston's appears to be ahead of the game. It has chosen to adopt the Mitchells & Butlers franchise model, which has ensured high levels of tenant longevity.

There will no RPI rent increases in the new Marston's Open House lease agreement with a five-year open rent review. Marston's believes that, like any other business, tenants will prefer to lock in their cost base for five years and the current Royal Institution of Chartered Surveyor (RICS) review with create a more robust rent review framework, which will ensure that tenant goodwill is disregarded at rent review.

By contrast both Punch and Enterprise's new free-of-tie pricing leases rentalise all wet income for tenants that opt for this.

Again, Marston's has trialled this route in years gone by and most of the agreements collapsed. Tenanted division boss Alistar Darby says: "I'm an evangalist on this - (a pubco) can't move all the variable costs for a tenant into fixed costs."

By Mark Stretton

Amazing. Astonishing. Extraordinary. Stunning. Just a few of the words used to describe the contribution of one particular speaker at last week's gathering of stakeholders in the leased pub company model.

Unfortunately other descriptors of the participation of Greg Mulholland MP at the Tenanted Pub Company Summit in London, included entrenched, regressive, ill-informed, ill-judged, inaccurate, appalling and shocking.

If the Liberal Democrat MP for Leeds North West was trying to upset people, he certainly succeeded. Especially Ted Tuppen after at one point suggesting the world would be a better place if Enterprise Inns went bust.

That sort of set the tone for his presentation and ensuing participation in an industry debate. Some of Mulholland's other assertions are not printable based on UK libel laws.

The day was designed to look at the issues, look at the licensee-landlord relationship and also consider progressive change and innovation. What certainly didn't help matters was that Mulholland breezed in at 4pm, having missed a day that revealed an industry committed to change.

But not only did Mulholland miss the day, he seemed to be missing about a year, if not 18 months, so out-of-date were some of his views (although when pushed he did accept that certain companies had changed).

He even intimated to me in conversation before his presentation that he would genuinely like to see some of the big pub companies broken up.

Mulholland's ensuing performance over-shadowed a hugely positive day. His first slide was devoted to how wonderful he was (although if Mulholland was half as good as he patently thinks he is, he would now have a job in the new coalition government).

He had an opportunity to engage, to make some decent points, and to pose some searching questions and challenges. And he blew it. Which is a shame, because when you exclude some of the madness and vitriol, he did make some valid points.

His presentation did include some home truths (is there genuine partnership, is the relationship fair etc), but they were taken to such extremes that they lost all merit.

What was deeply unnerving was that, at times, his strident views were so at odds with the facts - completely unburdened by the realms of reality - and yet delivered with such utter conviction, not to mention a rather unpleasant and overwhelming air of arrogance.

So flawed were his efforts that he motivated people like Paul Wigham of Sun Bars - a multiple lessee and no fan of the big pub companies - to defend those that Mulholland sought to attack, calling for recognition of change programmes currently in place at some of the big pub companies.

Simon Emeny, head of Fuller's managed and tenanted pubs estates, said: "It was a day that demonstrated that the industry is genuinely moving forwards in difficult times.

"Had Mr Mulholland seen presentations by Neil Robertson of the BII, Realpubs (a tied operator), Marston's or Enterprise, he would have seen a collective s