This article was also published in the Financial Times.
During our first brief meeting, Trevor Shelley, who has been buying and selling restaurants for the last 20 years, told me such an intriguing story, one that goes a long way to explaining London’s high prices, that I was particularly keen to meet him again.
This time, over lunch in Quo Vadis, one of three restaurants he had bought from one company and then sold on to three different restaurateurs, he elaborated on a sale that had not gone through. “I had been instructed to sell a large West End restaurant with a 2am licence. The rent was over £500,000 per annum, which was accurate because it had been recently reviewed. I don’t believe it was trading profitably but someone was prepared to pay the asking premium of £2 million. Everything was agreed and then I got a phone call from the vendor to say that he had had second thoughts and was taking it off the market. In his view, if he just holds on to it for a few more months it could be worth even more. I have to admit, I wasn’t terribly happy.”
Shelley, I have to admit, didn’t look too unhappy but then he has managed to carve out a very particular niche for himself. Along with David Coffer of Davis Coffer Lyons, Shelley is one of the two principal agents for anyone looking to buy a restaurant site certainly in the West End and in many other areas of London and the UK, too.
And while both these individuals now run companies that extend into much broader fields – Shelley described his company, ShelleySandzer, as consultants to anyone looking to open a restaurant, bar, night club, cinema or casino – it is the personal contacts these two individuals have established which makes them the first point of contact for any prospective restaurateur.
“At the moment business is still very good,” Shelley explained. “There are numerous London restaurateurs looking to acquire sites in New York and the US, such as Chris Corbin and Jeremy King at The Wolseley, Alan Yau at Hakkasan and Richard Caring’s Caprice Holdings and there are even more from the US, Europe and Asia who want to open in London. And while I can appreciate why British restaurateurs want to expand over there because of the weak dollar, I think that there is also a sense of frustration that they cannot acquire more sites here because the licensing and planning regulations are so restrictive.”
Shelley had just spent the morning with the chief executive of a top Chinese restaurant group keen to find their first site in London and that afternoon was meeting what he described as ‘my favourite kind of client, someone looking to open their first restaurant and bar’. But the less exciting aspect of his job is to let them know quite how difficult their search for the right site is going to be.
“A lot of my clients come over here thinking that because London’s culinary reputation is now so high that sites are widely available. They’ll say, for example, that they want 10,000 sq ft in Soho or Chelsea with a licence until 4am and we have to stop ourselves from laughing. And I think it is reaching a stage where the planning and licensing restrictions are really beginning to damage London’s reputation.”
Shelley contends that until more restaurant licences are available in the West End, prices will remain too high, new openings will be restricted and new talent priced out of the market.
“It’s a combination of two factors,” he explained. “Firstly, when a number of restaurants closed during the last recession their licences changed from A3, which is the crucial planning consent any restaurateur needs, to retail and these cannot now be changed back. Secondly, Westminster has been very, very reluctant to grant many new licences, an approach which forces rents and premiums up. There will hardly be any big openings in London this year as a consequence.”
Such is the paucity of large, licensed premises that Shelley quoted the example of one of the few large openings, The Chicago Rib Shack in Knightsbridge, where the owners agreed to a rent of £560,000 demanded by the landlord even though two different restaurants have already failed here. The only other substantial openings are Vapiano, a German interpretation of Italian fast food on the site of what was Mash on Great Portland Street, and the Russian backed Bob Bob Ricrad where Circus used to be in Soho. The only large, new restaurant will be an outpost of the Japanese Megu from New York to Bruton Street, Mayfair.
But, I countered, wouldn’t more restaurant licences also benefit him? Shelley smiled again before replying. “Of course, but the implications would go much, much further. Restaurants can brighten up whole streets as, for example, Cecconi’s has down in Davies Street. But just down from there is the Berkeley Square Café, which is closed and cannot re-open as a restaurant because it cannot get the required planning consent. And I am always sad to see that Porsche garage on the corner of Berkeley Square with hardly anyone in it during the day and closed at night. That would have made a wonderful brasserie overlooking Berkeley Square. The area around Great Portland Street north of Oxford Street would also benefit enormously as currently there are a lot of offices lying empty that cannot be used for any other purpose.”
A greater supply of licences would also stop rents rising so quickly, he believes. ‘Nice sites’, as Shelley described them, now fetch 40 pounds per sq ft whereas a ‘very nice site’ will fetch 70 per sq ft and sites in Mayfair over 80-90 pounds per sq ft. And if there were to be this shift, Shelley believes that the restaurateurs should be held more accountable for the noise and rubbish they generate. “Under the current system the premium goes to the vendor, who walks away with it. If it were weren’t so valuable then it would be possible to charge the incumbents more directly, to make them pay for example for the extra policing that is sometimes necessary. I know just how valuable these licences can be but at the moment huge amounts of money are being made for the wrong reasons.”
When I asked Shelley where he did see potential for growth in the West End he was very specific. “The area around Centre Point on New Oxford Street could be very exciting as there is a lot of run-down property there, it’s an easily accessible area and there are some very interesting plans for theatres and galleries. I do hope Westminster will appreciate its potential. The West End needs some pizzazz if it is not to fall behind.”
Shelley would very much like to be part of this. As we parted I asked him how long restaurant negotiations can take. “I’ve wished clients a happy anniversary on several occasions and one site is still being negotiated after three years. But I think that what really excites me now is trying to put deals back on the table when they look as though they have completely fallen through. Negotiating the sale of Scott’s in Mayfair was a very tortuous affair, I remember. ” And with that Shelley was off to buy, or sell, another restaurant.