Pub and Restaurant Mortgages London
Specialist licensed-trade commercial mortgages for freehold pubs, gastropubs, bars and restaurants across London. Underwriting runs on barrelage, wet and dry split, full-trading EBITDA, licence conditions and tie status. Pubs sit outside Class E, which changes the whole alternative-use argument. LTV 60 to 70%, rates 7.0 to 9.0% pa.
LTV
60 to 70%
Cover test
EBITDA 1.5 to 2.0x
Rate range
7.0 to 9.0% pa
Facility
£300K to £8M
Underwriting a London pub commercial mortgage
Pubs and restaurants are the most specialised part of trading-business lending and the sector where choosing the right desk matters most. The credit decision turns on five things: barrelage as the proxy for wet trade, full-trading EBITDA from filed accounts rather than a vendor's projection, the premises licence and its conditions including any late-night terminal hour, tie status (free of tie against tied to a brewery or pub company), and freehold against leasehold. Free-of-tie freeholds sit at the keen end of the 7.0 to 9.0% band because the operator controls supply margin and the lender has a clean asset to recover against. Tied freeholds price wider because the tie compresses operator margin. Leasehold pubs are the narrowest part of the market and only a handful of desks engage at all.
The London-specific point that gets missed is planning. When the Use Classes Order changed in September 2020, shops, offices, cafés, gyms and clinics were merged into Class E, but pubs, drinking establishments and hot-food takeaways were pulled out and made sui generis. That means a pub cannot be converted to another use without a planning application, and in London a great many pubs are additionally protected by Assets of Community Value listings and by borough policies specifically written to resist pub loss. For a lender this cuts both ways. It removes the residential-conversion escape valve that used to underpin secondary pub values, so the alternative-use argument that supported lending in 2015 no longer works. But it also means a trading London pub is competing against a fixed and shrinking supply of licensed premises in a city of over nine million people, which supports the trade of the pubs that survive.
London trading economics differ from the national picture in a way that shows up directly in the underwrite. Rents, rates and wages are the highest in the country, so the EBITDA margin on a London pub with a given turnover is usually thinner than on a regional equivalent. Against that, turnover per site is higher, food-led sites in central and inner London can run covers at a density regional operators cannot, and the night-time economy in Soho, Shoreditch, Brixton, Camden Town and Dalston generates a weekend trade that has no regional parallel. Lenders will not accept a turnover figure as a proxy for profitability here. They want the filed accounts, the current management information, and a wet and dry split they can test.
Gastropubs with food at 45% or more of turnover price closer to mainstream restaurant terms, because food margin smooths what would otherwise be wet-led volatility. Dry restaurants and cafés with no licence sit closer still to standard trading-business pricing at 7.0 to 8.0% pa, and the lender pool is meaningfully broader. Where a pub is let on an FRI lease to a managed operator or a pub company with covenant strength, it stops being a trading deal and becomes a leisure investment tested on ICR, which is a different and generally cheaper conversation.
Pub and restaurant assets we fund
Free-of-tie freehold pub
The best-priced licensed-trade asset. Owner-operator EBITDA-led, full control of supply margin, clean freehold security for the lender.
Tied freehold pub
Tied to a brewery or pub-company supply agreement. Still fundable, but the tie compresses operator margin and the pool narrows to specialist desks.
Gastropub and food-led pub
Food at 45% or more of turnover. Prices closer to restaurant terms because food margin smooths wet-trade volatility across the week and the year.
Bars and late-night venues
Soho, Shoreditch, Brixton, Camden and Dalston late licences. Licence conditions and the terminal hour are read as carefully as the accounts.
Independent restaurant freehold
Owner-operated restaurants across the boroughs. Trading-business underwrite on covers, margin and EBITDA rather than on barrelage.
Pub with let flat above
Operator accommodation let on an AST sits as unregulated semi-commercial and can price better. Owner-occupied living accommodation changes the regulatory position, see the FAQ below.
Finance structures for London pubs and restaurants
Predominantly the trading-business mortgage on owner-operator EBITDA. An investment route applies where the pub is let on an FRI lease to a chain or managed operator with covenant strength. Commercial bridging funds vacant pub acquisition or a change-of-use case with a clear stabilisation plan.
Trading-business mortgage
Owner-operated pubs, gastropubs, bars and restaurants. EBITDA, barrelage, licence and tie status underwritten. 60 to 70% LTV, 7.0 to 9.0% pa.
Commercial investment mortgage
A pub or restaurant let on an FRI lease to a chain or managed operator with covenant strength. ICR-led at 140 to 155%, 6.5 to 8.5% pa.
Commercial bridging
Vacant pub acquisition, refurbishment or a change-of-use case before trading stabilises. 8.5 to 11.0% pa with a term-out onto a trading-business mortgage.
Commercial remortgage
End of fix or capital raise on an existing licensed freehold, commonly to fund a kitchen refurbishment, an extension or a second site. 6.0 to 8.0% pa.
The London licensed trade
London runs the deepest licensed trade in the country and the only genuine 24-hour night-time economy in the UK. The London Plan designates Soho and the wider West End as an International centre and classifies Brixton, Camden Town and Dalston among its 36 Major centres, all of them with licensed trade at their core. Shoreditch and the City fringe carry the densest bar cluster in the capital, Bankside and London Bridge the riverside food-led trade, and the outer boroughs a large stock of traditional community pubs on high streets from Bromley to Ealing. The structural point for anyone buying is that pubs sit outside Class E as sui generis premises, so the licensed stock cannot quietly convert to something else, and many London boroughs actively resist pub loss through local policy and Assets of Community Value listings. Supply of licensed premises in London is therefore effectively fixed, which is a genuine support to the trade of the sites that remain and a real constraint on the alternative-use value a lender can rely on.
Lender appetite for London pubs and restaurants
Cynergy Bank is the most consistent named lender for London licensed trade, with real appetite on free-of-tie freehold pubs and gastropubs at 7.5 to 9.0% pa at 60 to 70% LTV. Allica, Shawbrook and OakNorth compete on the same profile where the operator has a strong track record and food revenue is a meaningful share of turnover. Together covers the harder cases, tied houses, shorter trading history, secondary locations, at the top of the band. Hampshire Trust and Cambridge and Counties are active on multi-site restaurant and bar operators consolidating through portfolio refinance. Dry restaurants and cafés with no premises licence sit closer to mainstream trading-business pricing at 7.0 to 8.0% pa with a broader pool. High-street commercial desks do not engage with owner-operated pubs at all, though they will look at a pub let on a long FRI lease to a chain covenant, which is an investment case rather than a trading one.
Pub & Restaurant FAQs
Buying or refinancing pub & restaurant in London?
Free-of-charge scheme assessment. Indicative terms within 48 hours.