Admiral launches 'right to buy' option

Jonathan Paveley, executive chairman of the 1,200-strong pub group, said that the ‘freehold option lease’ will be available only to Society of Independent Brewers members.

The right-to-buy will be offered on an individual basis, either free-of-tie or partly-tied. Admiral has already completely freed 70 pubs from the tie. Both traditional tenancies and longer leases can be negotiated, and deals could include pre-agreed mutual target returns.

Paveley also promised investment in properties and “realistic rents” to ensure “a sustainable operating model”. The average annual rent at an Admiral pub is less than £15,000, he said.

“It’s been a problem in the industry that the ‘rent line’ has not been fairly decided, and we’ve killed off far too many pubs.”

He added: “We are prepared to work with small brewers looking for their first, second or third pub, and there might be a way we could structure it so
that there would potentially be an option to buy in the future.

“It’s a more flexible approach compared to our competitors. We do recognise that in these tough times, we have to be more imaginative and do what is right for the pub, licensee and for our company.

“It’s only when those three things are working well that it works for us. For example, if the licensee is happy, then they are more motivated
in giving good customer service, which produces better turnover.”

The Campaign for Real Ale’s head of policy and public affairs Jonathan Mail welcomed the initiative, saying: “Offering more flexibility will help more pubs survive. However, the question here is whether or not the pubs will be offered at an open-market price, and not what the pub company would aspire to. There have been many occasions where pubcos have been asking lessees for much more money than it is actually worth.”

The BII’s (British Institute of Innkeeping’s) chief executive Neil Robertson also welcomed the move and agreed that it will help save more pubs.
However, he added some words of caution for licensees: “Admiral could
ask too much for the freehold value so I would encourage tenants to seek professional advice.

“Tenants will also be paying rent in the meantime, so they should remember to take that into account and make sure that they have budgeted for it for three years. And it is still very difficult to get banks to lend,
especially anything better than 60%.

“So there is the challenge of not only developing the business and — if you want to make it work — you will need to save a percentage of your income. And that’s not very easy. I look forward to seeing this in action.”