When it comes valuing a commercial property there are many factors to consider – from the location and condition of the building to its usage type, rent and lease terms, tenant quality and income potential.
For an experienced chartered surveyor who knows their market, it’s a job they are instructed to carry out day after day by vendors, dealing with potential buyers and lenders to see a deal through to conclusion.
However, when it comes to selling a public house, a valuer immediately faces many more challenges which not only make their role more challenging, but also exposes them potentially to greater professional risk.
It is why, if you’re thinking of selling or buying a public house, it’s likely that you’ll find a much smaller pool of experts who are willing and able to carry out these specialist valuations.
It is also why our highly-experienced public house valuation experts at Garness Jones and Barry Crux & Company are always in high demand across Yorkshire and Lincolnshire.
Trading figures key in public house valuations and sales
When selling a pub, the value must include both the property itself, and the business – taking into account its reputation, customer base, and profitability - and this are just a few of the many added complications and factors a valuer has to consider.
In reality, two pubs with identical buildings can have wildly different values depending on how well they’re run.
Trading figures are at the heart of the process when valuing a public house, as buyers are really purchasing an income stream, not just a building.
Everything from drink and food sales to contracts tying pubs to certain providers has to be considered, with a focus placed on providing a realistic estimate of what profits a competent operator should be able to achieve, setting aside any unusual or unpredicted costs.
Financial performance from not just for one year, but over several years, must also be considered to assess how profitable the business has been over a period of time, reducing the risk of the value being falsely inflated by one stand-out year prior to sale, which could be linked to specific events.
Higher risk makes lenders seek specialist valuers
For both lenders and valuers, due to the volatility of the sector, involvement in the purchase of a pub can carry a higher risk than a standard commercial property deal, and this is why it is a truly specialist sector.
Lenders are aware that repayments depend heavily on the purchaser’s successful trading, and so they look for the reassurance of using valuers with expertise and experience they can trust.
They need to feel assured that, should the new owners not make a success of the venture, leaving them unable to meet their repayment requirements, they will be able to recover the property and sell it for the valuation initially agreed against the loan.
Valuers owe a duty of care to the lender, and not just the client paying them to secure a sale at a good price, as if the lender was in a position where the pub had to be recovered and placed back on the market – and there was a significant gap in value - the lender could seek damages.
For the many reasons set out above, in what is always an uncertain market – albeit one where there are many fantastic opportunities to buy pubs and businesses with fantastic potential - all involved in a sale and purchase need the certainty of using specialist valuers.
At Garness Jones, as valuation management services (VAS Panels) members across Yorkshire and Lincolnshire, we are proud to be independently recommended for our expertise in public house sales.
And whilst it is an area some chartered surveyors may understandably shy away from, we are always on hand to provide expert advice and support – and of course celebrate and raise a glass to a good deal done for all on completion.
Contact christopher.noble@garnessjones.co.uk or barry@barrycrux.co.uk for support on public house valuations.
