Shares in pub operator Enterprise Inns hit a record high yesterday as a Deutsche Bank analyst theorised on its possible conversion to a REIT. The Times


Geof Collyer, an analyst at Deutsche Bank, argued that Enterprise may not have to split along 'op-co/prop-co' lines to achieve REIT status. Enterprise chief executive Ted Tuppen has already effectively ruled out such a split.

Companies cannot generate more than 25% of profits from sources other than rent to qualify as a REIT, whereas tenanted pub companies typically generate about half their profits from rent. However, Collyer argued that exclusive beer sales agreements to tenants, the other main source of profit, are effectively 'wet rent'. If Revenue and Customs could be persuaded to accept that definition, Enterprise could qualify without splitting.

Deutsche Bank said conversion would enable the company to triple its dividend payouts, implying a 2008 yield of almost 8% against forecasts of 2.8%. Enterprise shares closed up 27.5p at 690p ahead of results next week.