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Thu 19th Jan 2023 - Christie & Co: Distress hasn’t materialised with pubs but more restaurant CVAs set to come
Christie & Co – distress hasn’t materialised with pubs but more restaurant CVAs set to come: Stephen Owens, managing director of pubs and restaurants at Christie & Co, has told Propel distress hasn’t materialised with pubs and values have held up reasonably well, but warned that he expects more restaurant CVAs in 2023. Speaking as Christie & Co releases its Business Outlook 2023 report today, Owens said: “The first half of the year for pubs pretty much carried on where 2021 left off, with strong interest from pub companies looking to acquire quality premium pubs, so we saw the imbalance between demand and supply continue, and that kept pricing relatively strong. The second half of the year saw a more cautious approach, but what we didn’t see was a whole raft of property come on the market, so the supply side was still fairly restrictive. Even though there was more caution, we didn’t necessarily see that translate into prices and values being reduced or held back significantly. Volumes held up well in the first half of the year and was probably impacted in the second half. Every year we keep predicting distress which never seems to arrive. We still have operators out there who are acquisitive, but what has changed is we’re seeing more property come to the market. If you see a dramatic increase in supply, that may impact on prices. Those are the two key things to keep an eye on – is that supply side going to change dramatically and is that distress side going to take hold in 2023? I think we’re seeing some evidence of that in restaurants, but we’ve not seen that kind of activity in the pub sector. There’s lots of different factors at play, but from a property perspective, that supply side is still very tight, and there’s still good demand for quality assets. On the restaurant side, we’ve already seen a number of CVAs, and I don’t see that diminishing. What we’ve seen on the restaurant side is volumes decreasing. Freehold restaurants are still very popular, and there are a number of opportunities available from restaurants who have been through CVAs. So, where you see some positive price movement on pubs, we’ve seen a marginal negative price movement on restaurants, and that’s probably balanced out by freeholds holding up reasonably well.” According to the report, freehold restaurant sales showed a 30% increase in transactional volumes in 2022, with prices achieved within 10% of the final asking price. But 85% of transactions being cash funded caused offer levels to drop and saw the number of leasehold restaurant transactions with a premium at an all-time low. Christie & Co also saw a 29% increase in new instructions for pubs compared to 2021, and a 4.8% increase in those achieving their asking price. Overall, 87% of pubs sold were purchased for continued use as a pub and just 5% were distressed sales. Freehold pub assets remained most attractive to buyers, although there was still demand for free-of-tie leasehold sites in prime locations. And while deal times remain protracted and soaring interest rates and difficulty in pricing debt has dampened the mergers and acquisitions market, Christie & Co expects this to pick up in 2023.


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