Shares in pub groups Enterprise Inns and Punch Taverns surged this afternoon after Revenue and Customs gave Enterprise permission to convert to a REIT.
The news could herald the introduction of more specialist REITs, in line with how the sector has developed in the US. It is also a major step in allowing pub groups to unlock the value of their huge property portfolios.
Shares in Enterprise, which owns 7,700 pubs, jumped 29% to 510p after it told the Stock Exchange that Revenue and Customs said it could convert to a REIT as long as it undertook an internal restructuring.
Company split
This would involve creating a group structure split between an operating company and property company, with the property company paying rent to the operating company.
Enterprise said it was undertaking an analysis of this restructure which could take several months.
Punch Taverns, which owns 8,400 pubs saw shares jump 11% to 600p. It said that the discussions Enterprise had been undertaking with the Revenue were consistent with its own discussions, and it continued to explore the potential of a REIT conversion.
Punch recently ended possible merger talks with rival Mitchells & Butler, which has been under pressure from shareholders, the most prominent of whom is Robert Tchenguiz, to unlock the value of its property portfolio.
M&B lost almost £274m on a proposed property joint venture with Tchenguiz after hedges put in place against inflation and interest movements went against it.
