Pub vendors could face 'major headache' as number of cash buyers set to fall

That’s the view of CBRE’s Paul Breen who believes it could mean sales take longer to go through — and cause some deals to fail.

“We are going to see more deals subject to bank funding; people only have so much cash,” said Breen. “That’s going to be a major headache for vendors because there is more ‘conditionality’ involved.”

He said relying on bank funding takes longer for sales to go through because banks have tight criteria. “With a bank, it can take from three to six months to buy a pub,” Breen said. “The bank is usually going to find something that it is not happy with and it will pull out of deals.

“Something can come out of the woodwork to cause a deal to fail.”

Simon Hall, director and head of pubs at Fleurets, has concerns about fewer cash buyers coming forward for better-quality pubs.

“I think the market is still dominated by cash buyers, which includes people who have other assets such as another pub. There are no signs of that slowing down,” he said.

“However, as property prices increase because of better stock on the market, it will start limiting the number of cash buyers.”

Stephen Taylor, managing director at Guy Simmonds, disagrees. He said: “There are an awful lot of cash buyers — it’s almost infinite. I’m amazed at how many there are. There are lots of people in fortunate positions having sold their property.”

Taylor said he is seeing buyers looking for a change in career after being made redundant from a City job. He labelled them “shrewd”, explaining they will buy only at the right price.

Neil Morgan, director of pubs at Christie+Co added: “The fact is that the majority of pubs on the market are from the tail end of pubco estates or through administrations, which are purchased for site value rather than for their trading performance. The buyers for this sort of site are predominantly experienced operators who may have exited the sector at the peak of the market and are seeking a re-entry point. And in these cases, cash is available for such acquisitions (and the banks are more reluctant to lend at this end of the spectrum).

“In our experience, pubs of a higher quality are usually taken up by the pubcos, national and regional, or by private equity companies which will have access to funding, so for us cash isn’t a key driver at the higher end of the market.”