Tuesday, August 21, 2012

What is a Sustainable Rent?

‎8% on turnover is what private landlords expect to get as a sustainable return on their capital investment in bricks and mortar and is what breweries used to look out for with their pubs. Sustainable meaning the freeholder can expect, with some sense of mature responsibility, to sit back and need do little other than see the interest come back on their outlay while the tenant does a reasonable job, makes a living that includes putting reserves aside for maintaining the premises, investing in their business, rainy days, high days, holidays and pensions while being content that the amount they are paying the freeholder is not so much that it makes their lives a nightmare of bonded labour.

The advent of pubco's incrementally shifted this return on investment expectation to 14% and up, while they were buying pubs at ridiculously high premiums from each other in a stupid big boys with their mum and dad's credit cards spending spree which meant the ROI need increased exponentially. Add in the wholesale endemic totally irresponsible abuse of tie supply prices and you see clearly why there's been a seriously reducing amount of no profit left in tied pubs at the leaseholder level, add in any downturn in trade and you see that's why pubs are closing all over Britain.

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