Again the voice; this time from behind. “Bob, I’m here.”
Turning, I found myself standing in front of a seemingly deserted large pub. Suddenly the weathered stone walls merged into a face. “It’s me Bob; I need to talk to you.”
“But you’re a pub, you can’t talk.”
“Oh we can, but only to those that wish to listen. I’m sorry if I startled you but I’m desperate to talk to someone; I’ve got so much to say.”
“Well, I’m always willing to listen. What’s on your mind?”
“Well I don’t really know where to start. So much has happened in this pub over the years. There was a time when I was the hub of the community united in their love of the great British pub.
People have enjoyed some pretty special moments here. I’ve watched them fall in and out of love, laugh and occasionally cry, celebrate the highs and come together during the lows.
These walls have seen it all I can tell you. People came here in search of camaraderie and friendship and invariably found it. Life’s little problems could, for a few precious hours at least, be left at the door. But that’s all changed. Nobody comes to visit me now Bob. What happened? Where did they all go? Why don’t they love me anymore?”
“Well look at the state of you for a start” I replied, pointing to the grubby walls and peeling paintwork. “You’re old and dilapidated. You need to tidy yourself up.”
“I know. I’m ashamed of myself, I really am. But it’s not my fault; nobody has invested in me for years.
"A brand new coffee shop has opened up just down the road. Gleaming fixtures and fittings; glistening toilets. I can’t compete with that.
Why didn’t my pubco spend any money on me Bob?”
“Unfortunately the big property companies in particular were guilty of tunnel vision”, I replied. “Focused purely on growing their property portfolios, they didn’t have the foresight to realise the importance of investing in their acquisitions to ensure long term viability.”
Now they’ve been caught with their trousers well and truly down. Like many, they were taken in by soaring book values, an inevitable consequence of an over inflated market, one fuelled primarily by their own overwhelming desire to expand.
They also got complacent; assumed people’s love of beer would never wane, that they’d continue to frequent pubs and not to be too fussed by the quality of the interior. That’s why so many pubs today look what they are; the product of a bygone era.”
“You’ve got that right. I’d invite you in to have a look around Bob; but quite frankly I’m ashamed. Do you know I’ve still got the same toilets I had in 1958? The pubco never spent a penny on me. Why have they always been so reluctant to show me love?”
“Too busy cosying up to shareholders” I replied “or ensuring executive pay awards and bonuses keep heading north whilst tied tenants get poorer by the day. They know the game is up; they’re just trying to keep the scam going long enough to cash in their chips and bail out.”
“It’s funny you should say that because I recall a conversation between an RM and a BDM in my back bar. One of my previous tenants was about to go under and they were discussing what to do about it.
The RM talked about ‘maintaining the illusion of value’. Any idea what he was talking about?”
“Well imagine the scenario whereby a succession of tenants take on the same pub yet none of them manage to make a go of it? What would you conclude?”
“The rent is too high?”
“Probably. The obvious thing to do in such a case is to lower rental premiums, isn’t it? Of course that’s the last thing property companies want to do, they’re in the process of offloading many of their outlets.”
“But surely giving the tenant a fair deal makes the pub viable and that’s good for everybody isn’t it?”
“Not necessarily” I replied. “You see the book value is inevitably tied to the rental premium an outlet can achieve; it’s one of the first thing investors look for. If a pubco reduces its rental premium it’s a tacit admission that their estate is overvalued.
The sad truth is that whilst book values have indeed fallen, rents haven’t; resulting in penury, hardship and ultimately heartbreak for increasing numbers of tenants. Also, let’s not forget that rateable value is linked to inflated FMT figures. Inevitably this ensures many of the bills sent out by local councils are way out of sync with the realities of trading in the ‘New World’.
Companies such as Sky also benefit as their price structure is linked to inflated RVs. Is it any wonder the industry is in such a mess? The tenant is getting screwed every which way!”
“You’re right there Bob. Do you know I’ve had four tenants in the last two years? None of them have been able to make any money. The BDM just keeps insisting they’re not REOs.”
“He’s burying his head in the sand” I replied.” It’s always easy to make the tenant the scapegoat for their own failings. They’re preoccupied with servicing debt; it’s as simple as that. With such an obvious agenda, how can a tenant hope to get a fair deal?”
“I suspect you’re probably right. In my case, all they’re looking for is a caretaker to keep me trading until they offload me. They keep saying I’m no longer viable.”
“Take my word for it, you’re still viable. It’s the so called ‘business model’ that’s well past its sell by date.”
“Try telling them that. They’re trying to sell me off as a pub. If there are no takers I’m penciled in to become a supermarket or a block of flats. Failing that I’ll probably become a car park.
A bloody car park, can you believe that? I’m a pub Bob. That’s what I am, what I love being. Isn’t anybody going to stop this insanity before it’s too late?”
“Probably not” I replied, “but let’s look on the bright side; finding somewhere to park the car won’t be a problem from now on, will it?”