Supplementary written evidence submitted
by Enterprise Inns plc
ORAL EVIDENCE SESSION—PUB COMPANIES,
7 JULY 2011
Further to yesterday's session, I am writing to clarify
certain key issues that were raised:
1. Mr Binley persistently claimed that he had
evidence that Enterprise Inns (ETI) has misled tenants who take
pubs with us. I take such a suggestion extremely seriously, not
least because such statements have a very damaging effect on my
business with regard to tenant recruitment. Could you therefore
ask Mr Binley to forward this evidence to me as a matter of urgency
so that I may ensure that any member of the ETI team who has behaved
in such a way may be dealt with as appropriate?
2. Similarly, Mr Binley claimed to have evidence
that ETI was not following RIGS guidelines. If he is referring
to the statements made by Mr Mallen at the Oral Evidence session
held on 30th June, this is of course not evidence but Mr Mallen's
opinion. If he is referring to the complaint to BIIBAS made by
Mr Simon Clarke this is simply an unproven allegation and not
evidence. If he has other evidence, then again I would take this
most seriously and would ask that he provides such evidence so
that I may follow this up within the business.
3. With regard to point 2 above I attach as appendix
A,[9]
as promised to the Committee, correspondence from John Anderson,
Associate Director of RICS Professional Groups and Forums, confirming
that he has "no reason to suggest that Enterprise Inns
are seeking to circumvent the valuation guidelines issued by RICS".
4.1 Mr Zahawi politely but persistently questioned
me regarding the alleged breach of RICS guidelines submitted to
BIIBAS as a complaint by Mr Simon Clark of Fair Pint. I may have
appeared evasive and apologise for that. I believe Mr Clarke's
interpretation of RICS guidance is deliberately misleading and
pursues a valuation methodology which is invalid. I attach as
appendix B[10]
copies of correspondence to date between BIIBAS and ourselves.
Perhaps when you see the detail in the letters you will forgive
my unwillingness to attempt an explanation during the session.
4.2 I would point out that, despite conducting
hundreds of valuations and rent assessments in new lettings and
rent reviews since the updated RICS guidance was published, there
have been no other complaints over valuation methodology made
by any tenant, lessee or professional trade advisor. I believe
that the complaint made by Mr Clarke is fundamentally an issue
of his selective interpretation of valuation methodology and we
are content that the matter should be reviewed and addressed through
BIIBAS and, if appropriate, the RICS.
4.3 On a practical and commercial level, in 2005
Mr Clark paid £150,000 premium to take over the lease of
the Eagle pub in Battersea. I attach as appendix C[11]
a copy of his business plan which was presented to ETI in support
of his taking over the pub and to Lloyds Bank to support his application
for a £90,000 loan. You will note that his forecast profit
before interest on his loan but after rent payable of £51,778
was a very healthy £44,867. On 10 December 2010, we received
a proposal from Mr Clark that, at his next rent review, his rent
should be reduced to zero. On 27 April 2011, in accordance with
normal practice, we submitted our proposal for the rent to be
reduced to £45,000 (appendix D),[12]
showing clearly how we had arrived at such a proposal and recognising
that in these times of rising costs, his profit before rent and
interest may indeed have reduced from the £96,105 in his
original business plan to closer to £90,000. At the very
least, I consider our proposal to be professional and fair and
Mr Clark's zero rent to be confrontational and unrealistic.
Finally, although I haven't seen a copy of the transcript,
it has been pointed out to me by a colleague who listened to the
session that I may have implied that RICS guidance actually said
that comparisons between free of tie pubs and tied pubs were as
relevant as comparisons between pubs and fish and chip shops.
Can I be clear that these are not words used in the RICS guidance,
merely my interpretation of their view in paragraph 7.21 of the
guidance that comparability between tied and non-tied sectors
is problematic and that it is preferable to compare transactions
relating to similar properties with similar lease terms.
Once we have had sight of the transcript, we will
write to you again covering any other points that may be relevant
and enclosing, among other things, full details of our training
and authorisation processes with regard to our regional managers
and RICS guidance. We will also provide clear evidence, with explanations,
that Mr Mallen's statements to the Committee about the "Enterprise
survey of 700 pubs carried out by Milestone Accountants"
were misleading. ETI carried out no such survey, although the
independent Milestone survey of 701 pubs did include data from
137 poorly performing ETI pubs where we had enlisted the accounting
services of Milestone to support discretionary concessions that
we were giving to these struggling pubs.
G E Tuppen CBE
Chief Executive
Enterprise Inns plc
8 July 2011
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