Save The Cross Keys

Save The Cross Keys

Save The Cross Keys

Here’s the problem

Developers want to turn The Cross Keys into a McMansion complete with basement swimming pool!

With your help we can save The Cross Keys, it’s easy but you must ACT NOW

When property developers asked the council for permission to turn this 300 year old pub into a McMansion they were told to get lost.

But now they’ve launched an appeal.

And for the fate of The Cross Keys that’s pivotal. Because an appeal’s a place where money talks. Given the millions that are at stake, the developers are sure to be represented by only the most experienced – and most expensive – advisors.

In short, they’re likely to spend whatever’s needed to hit the jackpot on this one. Even if the local community suffers as a result.

And that’s why it’s essential that we – as a community – fight back as hard as we can.

If you believe that the loss of this historic, much cherished pub will damage our community – and diminish the quality of local life – here’s how YOU can help.

Add your name to the Petition
There’s a letter to be presented to the Planning Inspector on the day of the appeal.

  • Print off the flyer to give to your friends and neighbours
    Click here to download the flyer
     
  • Tell your friends
    Urge your friends to add their name to the open letter and do what they can to help

  

  • Go the appeal
    The more people who show up, the better our case

It’s not just The Cross Keys
The same group of developers who own the Cross Keys also own the famous Phene Arms in in Phene Street. And yes, they’ve applied to turn that into a luxury house too. The appeal date for the Phene Arms is yet to be set – but the application’s already in.

Discussion
Please note, commenting here will not add your name to the petition. Click here if you want to add your name to the petition

  1. ERW says:

    Its depressing to see something like this. As an American, I think, ‘that’s something we would do!’ But seeing as how this country isn’t even 300 years old yet, its less heinous on our end. For you all, its an abomination!

    Why would you want to destroy something that irreplaceable? Fingers crossed that the local community can fight this pending doom and save that lovely pub.

  2. Mark says:

    We wish you all the best in keeping open this lovely, historic pub.It would be a travesty if this public house had to close.
    Historic buildings and traditional pubs are part of our heritage and must be protected. Please save the Cross Keys in Chelsea :-)

    All the best in your fight to save the Cross Keys,

    Real Ale Up North

  3. James Appleyard says:

    Aren’t there enough crass modern constructs in London already? With no history there is no future.

  4. Colleen O'Sullivan says:

    People move to an area because of community hubs like the Cross Keys. When they’re removed, everyone loses.

  5. Leah Ellis says:

    Save the pub!

  6. Edward Voute says:

    Save the Cross Keys

  7. Tim Sullivan says:

    Guys, best of luck.
    Fingers crossed!!
    cheers.
    Tim

  8. Nick Griffin says:

    Pubs are an essential part of our heritage and we must do all we can to preserve them

  9. Too many pubs in Chelsea, where I visit frequently are bring closed and demolished.

  10. Paul says:

    Too many pubs are going, hope we can save this one. Good luck

  11. William Howell says:

    This is the oldest pub in Chelsea. Do the right thing

  12. Primrose says:

    300 years – irreplaceable. Think before building around a community who you’ll be taking history away from.

  13. mr market says:

    “saving” something on someone else’s tab is easy. if it is so valuable as a community institution, put a kitty together to buy it and run it as a non profit. if you want to save a business, go spend your money there. you didn’t. so now it is too late.

    • John says:

      that’s not really how it works. as a house this building is worth 4 times more than it is as a pub. so it’s in a developers interest to not to run it as a pub but rather to convert it into a house.

      • mr market says:

        thats exactly how it works. so if you feel that whoever owns this building should leave the 3 times money on the table and run it as a pub, because the sentimental value is higher than the said 3 times money, then that person should be YOU, leaving YOUR money on the table

        • John says:

          um… i think you’ve just shot yourself in the foot.

        • Richard says:

          That’s an anti- society view. There is planning law for a reason. Some status’ are worth protecting as they are seen to be if benefit to society at large. I suppose you suggest tarmaccing the green belt, putting caravan sites on SSI’s if someone can make money doing so. A classic case of a stupid person who knows the price of everything but no idea of the value of anything.

  14. Local Customer says:

    Dear Mr Market,

    I have, in fact spent much of my hard earned salary through working in the non-profit sector at the Cross Keys, as have many of my friends and family. I’m not at all a regular pub goer, but the Cross Keys has been so much more than a pub. It’s hosted engagement parties, christenings, wakes, mothers day lunches and a place I as proud to take international visitors to as a lovely example of British culture. The staff were delightful and management always doing their best to make everyone feel welcome. Often the pub was so full we couldn’t get a table.

    This isn’t a matter of not having enough custom, but seems it’s a matter of some individuals wanting to make some significant profit out of a historic public building. I’d love to see the maths; how much do you buy a public site like a pub for, and if this was sold as a private property, how much would the developers make? Please do help us to understand this, as I’d like to be convinced as to whether under the right ownership this pub would need to have non-profit status, or as I would imagine is the case – whether it could operate as a well run business.

    I was curious to see that the Cross Keys shut down their business just ahead of the Jubilee long weekend. If they wanted the pub to be a profitable business, surely they would have kept it open to do a brilliant trade over that weekend when everyone was looking for someone to celebrate by the river.

    From where we are standing, it seems the owners don’t want to maximise the potential of this piece of Chelsea history, but just make some profit out of it. Surely that is something the council can’t allow. In the interest of protecting the history of the building and building local community in Chelsea, I hope they find new owners who will maximise its potential.

  15. jasmyne king -leeder says:

    This pub has history like alot in Kensington/chelsea . we do not need another million pound house

  16. Has not this place been a restaurant – not a pub – for several years?

    None the less, was one of my fave watering holes in my long distant youth.

    Chelsea is /has become an affluent ghetto devoid of real social hubs – in real language, pubs.

    Might be why I now live in France…

    Bonne chance against the forces of Mordor.

  17. c.hopkins says:

    A disaster to lose the Cross Keys.
    What more can I say?
    Contact members of the the Planning Committee of K & C Council but, sadly, because of the Use Classes Order, there is not much they can do about it.

  18. Valerie says:

    Residents must target the council’s planning strategy officers and demand that the use class designation is ‘clarified’ as a matter of urgency so that it could have retail status and be converted to a restaurant (maybe with a flat upstairs).

    Cllrs are dimbo politicians who just do what officers tell them to, in the 99% main. Don’t waste time on them unless an election is closing in on them.

    The Local Plan: how many residents have any idea about the council’s planning policy?

    Maybe as the oldest pub in Chelsea, English Heritage would be willing to List it. That is a piece of work for residents to do too. I used to live in that area….but am old and ill and no longer live in London so I can’t help more. Beyond architectural merit is the social and local historical as justification for Listing. That would help prevent demolition and might prevent conversion to a dwelling.

  19. Valerie says:

    Are you working with The Evening Standard? With the architecture and other writers on the Nationals? You should be enlisting their help and getting them to write about it. Hugh Pearman, Marcus Binney, Rowan Moore. Simon Jenkins! Get them onto it.

  20. Valerie says:

    Please go to the DCLG website and download the NPPF (National Planning Policy Framework) document that dumbed down the planning system to about 65 pages on March 27th 2012. See ammunition for your letter to the Planning Inspector there. Go to the Secretary of State and ask for the planning decision to be called in. Has that been done? Who is your MP? Almost certainly Conservative and crucial to getting help from the Secretary of State to call in the planning decision. If you are not out of time on that.

  21. Tina Orphanou says:

    History is being destroyed everywhere you go. When will it stop!

  22. John Cooper says:

    Boarding up the Cross Keys has stimulated this protest but be aware although still operating a similar application has been submitted to convert the Phene into a private dwelling. The same developer is behind both applications.
    Although the original application was rejected by the Council the owner has apealed the decision. Today 9/07/12 is the last day to submit objections to their appeal against the earlier rejection. Submit your objections on line.
    The references are:
    RBK&C Application Numbers PP/11/5552, PP/11/2421
    Appeal Reference 12/2172028, 12/2175522
    http://www.planningportal.gov.uk/planning/appeals/online/comment
    PLEASE HELP US SAVE THESE ICONIC CHELSEA PUBS

  23. Amanda says:

    I’m not one to sign petitions or normally care about this sort of thing. However, I took a detour this morning so I could drive past The Cross Keys and reminisce of my wedding reception which only took place this March gone. I had planned that for my husband and I to have our first anniversary dinner at The Cross Keys next year and to my horror I saw it was boarded up!! This place was a perfect venue for my reception, the staff were great and food standard for a pub was excellent. It would be an absolute shame for London to lose such a charming landmark which is not just another chain of pub or bar.

    Amanda

  24. Message for John
    The Hornet has around 800 local hits a weeks. It read by all K&C cllrs and officers, as well as residents and RA’s
    http://fromthehornetsnest.blogspot.co.uk/

  25. I object to the destruction of yet another element of Chelsea’s rich history.
    It is unnecessary and driven by greed. The Cross Keys is on every tourist’s agenda and to
    destroy it will impact upon the local economy

  26. Hi, I think you’ll find all the info you need about what we did to #savethevic on our website plus a link the planning appeal decision. We have heard today that the developers McCarthy & Stone are not going to appeal against the decision and that they are no longer interested in purchasing. Next steps to approach the owners Spirit Group to discuss purchase.
    >
    > It can happen but it does take a lot of hard work & the involvement of the commu

  27. Anthony says:

    A bit of a correction may be necessary, the pub is actually Victorian not 300 years old, it overlaps a site which had a coaching inn on it and takes its name from that building which was 200 years old at the time and was demolished to make way for a rather bland and standard Victorian fare.

    To save pubs like these which were built for the original working class communities surrounding them and now landlocked from passing trade we need to use them instead of the many new cafe’s and bars opening elsewhere . I’ve been there on occasions, it tends to be empty and I always felt sorry for the neighbours who’s bedrooms overlook the beer garden. Additionally supermarkets need to stop selling cheaper alcohol. In conclusion don’t entertain at home, get a little less middle class, don’t sign a petition go out every night to your local even if it’s only for a couple of drinks.

  28. William Shuttleworth says:

    I think the Chelsea Brasserie (formerly the King’s Head and Eight bells) is in the same or related ownership.

  29. Dr Jason Sykes says:

    I think the idea of a consortium of locals buying the pub and keeping it going would be lovely and give the pub a great boost. 300 locals/shares at £10k a piece? £3M would be a good start. Profits and equity distributed per share. Surely there is someone on this forum with knowledge to put be able to put such a thing together? I hope the next flyer I find on my car is to ask if I would like to buy a share in my local pub.

  30. There will be no pub for local people to drink at. The nearest will be a ten minute walk away in Old Church St called the Pigs Ear.
    I like this pub so much I immortalised it as the Crooked Billet in my novel TAKING LEAVE..
    Please do the decent thintg and save it as a pub and not yet another ‘luxury apartment block’ for some clever property developer to sell to foreigners.

  31. nicolette meeres says:

    So many happy memories Of the Cross Keys, an iconic London pub that I first went to
    back in the fifties. An historic and beautiful building open to everyone – now to be turned into an impossible expensive private residence by some greedy developer.
    Alas for the local community, Chelsea and London. It should be protected as part of
    our collective inheritance. Will the Council be completely toothless ? Having said No
    will they give in to financial pressure at the Appeal ? And they, elected to look after
    our and the areas best interests for succeeding generations, ignore the wishes of the
    local people. I sincerely hope not.

  32. Anthony says:

    Another correction I’m afraid,

    It isn’t owned by a developer but the two landlords that have been there for just short of five years who I got to know while drinking there. They don’t own any other pubs but one of their uncles owns The Phene. While drinking there i only ever saw one regular apart from my sad self and he was unfortunately incoherent. There are about 40 pubs and bats within 10 minutes walk and The Pigs Ear which has got some proper passing trade is actually about a minutes walk unless you get lost after too many.

    If we all really cared for the place and used it they’d be profitable and functioning as it is the two chaps who’ve sunk five years of their money into it are under the tide of change driven by us and now getting a royal kicking at the same time. Aren’t we all a touch hypocritical?

    • John says:

      there’s a lot of local publicans who believe that this pub should be profitable.

      the issue seems to hinge on how much was paid for the pub in the first place. if you over pay for any business – anywhere, and whatever type of business – you’ll make a loss.

    • Richard says:

      I was a regular. I am not, however, incoherent (or at least not ordinarily). There must therefore have been more regulars than you thought. Indeed, as someone who lives across the road, I can tell you that the pub was well-used. Just as the 1,200 signatures to this petition suggests.

    • John says:

      hi anthony

      i notice you’ve posted a new reply. not able to put it up just yet, but it’ll be posted later today. there’s just one thing i’d like to correct: you mention 1,200 people. it’s actually 3,000 plus. and growing.

      • John says:

        hi anthony

        sorry for the delay in getting these comment up – local web was down all last night. the report which i’ve copied below might go some way to answering your questions. please take a minute to read it.

        The Cross Keys Public House, 1 Lawrence Street, Chelsea, London SW3 5NB

        Feasibility Appraisal

        Introduction & Executive Summary

        I write with reference to your instructions to provide you with an appraisal as to the potential feasibility of this public house and particularly to provide my opinion in relation to the viability report supplied by Trevor Watson of Davis Coffer Lyons (DCL). It should be stated at the outset that the information supplied by Mr Watson is largely undisputed. However, the emphases and conclusions drawn there-from are contentious . In view of the latter, I have sought to offer additional information where appropriate and outline my own conclusions thereafter. I do not propose dwelling on the alternative use as a restaurant and have concentrated my views on its use as a public house.

        I have intentionally sought to emulate Mr Watson’s format and layout as I believe this will assist in comparing and contrasting our respective opinions and views.

        The pub is currently closed and vacant. I am acquainted with the premises and whilst I have not undertaken a full inspection of the ancillary spaces I have frequented the Cross Keys as a customer, most recently in the latter part of 2011.

        I am an experienced valuer of pubs and other licensed premises, both in London and
        the Home Counties. I enclose at Appendix 1 my CV for your information.

        Appendix 2 contains a summary of the accounts information supplied and upon which I have relied. I reserve the right to amend my opinions in the event of additional information becoming available.

        I also have experience of valuing and advising in respect of other pubs in the immediately surrounding area.

        I have no conflict of interest in this matter and am pleased to report accordingly.

        For the reasons which are more fully explained below, I am of the following opinion:

        I and Mr Watson agree that the accounts show that the current pub business is operating at unusually low margins and unusually high costs and on this basis it would be non-viable.

        If the pub were operating with conventional gross profit and labour margins, both I and Mr Watson have concluded it would be viable based on EBITDA alone.

        I disagree with Mr Watson’s conclusion that the pub is nonetheless non-viable. This conclusion is based upon his deduction from EBITDA of bank charges, interest and depreciation. I disagree with his methodology since this is contrary to the Royal Institution of Chartered Surveyors valuation principles and appropriate best practice. Once this is accepted it is clear that the pub would indeed be considered viable.

        General trends in the pub sector indicate that whilst trading is tough, those with a strong food offer and capable of purchasing drinks at “’free of tie’” prices with wholesale discounts (such as the Cross Keys) are the only growing sector and therefore most likely to succeed in the foreseeable future.

        I consider the Cross Keys, benefiting from the latter combined with its heritage and clear local resident demand and support is well placed to constitute a viable operation.

        Location
        Mr Watson’s overall outline of “Location” is not disputed. However, it should be noted that whilst the road is a residential thoroughfare, connecting Cheyne Walk to the south with Upper Cheyne Road to the north, the premises are visible from Cheyne Walk and Cheyne Row at the end of Lordship Place, the road opposite the pubs frontage.

        Description
        Mr Watson’s overall outline of “Description” is not disputed.

        I am aware the current owner undertook works involving significant investment since acquisition in 2009. Whilst not disputed, with the exception of the retractable rear roof, most of the works were either behind the scenes, e.g. kitchen appliances, or necessary works that would have been required of any operator undertaking a reasonable maintenance and redecorating programme.

        It is noted that the accounts do not indicate that the investments resulted in increased trade since 2009. The accounts presented show net sales dropped from £887,588 (to Dec 2010) to £858,046 (in the same period of 2011), exclusive of customer service charges. This sales drop represents around 3.3% over the year. As per Mr Watson’s later comments (in his ‘Market Commentary’) “The British Beer & Pub Association (BBPA) reported a 3.8% decline in beer sales in Q1 for 2011. In January 2011, beer sales were down 7.5% and in October 2010 they were down 7.8%.” Overall I would expect many public houses to have experienced sales declines. I would expect pubs with a higher proportion of food sales to experience a less dramatic effect but do not consider an overall sales decline to be unusual in the current economic climate.

        Contrary to Mr Watson’s statement, no evidence has been presented to confirm that the premises were significantly better presented in 2011 than was the case in 2009. This would appear to be his opinion and nothing more. In my years of frequenting the pub there appears to have been no significant material presentational changes other than the roof alterations to the rear and some redecoration and replacement of fittings.

        Local Enquiries
        Planning
        Mr Watson’s outline of “Planning” is not disputed.

        Licensing
        Mr Watson’s outline of “Licensing” is not disputed.

        Rating
        Mr Watson’s outline of “Rating” is not disputed. It should be noted that the Rateable Value in the 2010 Valuation List is £92,000.

        Competition
        Prior to closure, the business competed with a wide variety of restaurants and bars throughout
        the Chelsea area. These include the following:

        Property Comments
        Whilst the existence of competitive operations is not in dispute it could very well be argued that the Cross Keys has more notoriety and was a better known and established public house than many of the listed competitors.

        Cheyne Walk Brasserie
        Cheyne Walk, SW3
        Whilst on Cheyne Walk the frontage is in the main masked by trees between the property and the Chelsea Embankment.

        Pigs Ear
        35 Old Church Street, SW3
        Old Church Street is a one way ‘cut through’ from Kings Road to Chelsea Embankment.

        Phene Arms
        Phene Street, SW3
        Phene Street is a dead end, the pub is on the corner of Margaretta Terrace which is a side road offering no efficient short cut and therefore is used by residents on the road.

        The Coopers Arms
        87 Flood Street, SW3
        A Young’s managed house on a busier road joining Kings Road to Chelsea embankment.

        The Sporting Page
        6 Camera Place, SW10
        I would not necessarily describe this as a “traditional pub” in that the building which it occupies was probably built around the 1960′s. Camera Place is again a relatively quiet back street.

        The Builder’s Arms
        13 Britten Street, SW3
        Back Street off the King’s Road.

        The Surprise
        6 Christchurch Terrace, SW3
        Back street just North of Royal Hospital Road

        There is no dispute that there is competition from a wide variety of other eating and drinking establishments throughout the neighbourhood. Whilst it is accepted that drinking and eating out trends have changed, most, if not all, the cited competitors have been established for many years. Over the past 50 years there are fewer competitors, with pub closures, and more potential customers, with the conversion of houses to flats. This is not necessarily indicative of an expectation of increased trade but should not be considered unusual as compared with any other affluent, predominantly residential, area of London.

        Most of the competition outlined by Mr Watson could be argued to lack passing trade and therefore most trade as destination venues, or as neighbourhood facilities, specifically targeting the residents of the immediate area.

        Market Commentary
        There is no dispute that the UK public house market has experienced difficult trading conditions over the course of the last few years and that there have been a number of contributory factors. It should however be noted that this particular pub was ‘free of tie’. The ‘tie’ enables a pub owning company to obligate the operator to purchase products from them usually at a highly inflated price. The significance of this is that the tied operators profit margins are considerably reduced. This tie obligation applies to over half the pubs in the UK and may apply to several of the competitors to the Cross Keys. In this instance, the operator was able to purchase products in the open market at wholesale prices and thereby should have been able to achieve a much higher margin than their tied competition. The Builders Arms, Britten Street, The Crown in Dovehouse Street and The Sporting Page, Camera Place are all examples of pubs that are or have been tied. I consider being a non tied operation puts the operator of the Cross Keys at an immediate advantage over and above their competition in terms of profitability.

        The national rate of pub closures, in May 2011, was reportedly approximately 25 pubs per week. CAMRA reported the majority of closures to be in the tied pub sector. This figure had fallen from a figure of approximately 52, not 40 as Mr Watson reports, pubs per week at the height of the recession. The British Beer & Pub Association (BBPA) also reported that whilst “Local pubs were the most vulnerable as communities were hit by the fallout of the economic downturn,….. The research suggested businesses that provided food were far more resilient to the recession. And branded pubs and cafe-style bars were opening at a rate of two a week, according to the report.”

        I agree with Mr Watson’s commentary that “The market in London for freehold pub properties, for continued pub use and alternative use, has remained stronger than that for the rest of the UK. Trading conditions have proved to be rather more resilient.”

        Pub operation costs have increased over the years, minimum wage, utilities and rates, to name a few. However, ”free of tie” operators are better placed to accommodate such changes as their profit margin is so much higher than tied operators. Sales of £10,000 to £15,000 a week are targeted for managed houses. If anticipated to be lower the owner will generally seek to rent the pub to a lessee or tenant on a tied agreement, enabling a revenue stream from commercial rent and profit on tied products. If turnover levels are not at this level, there will be insufficient profit to provide operators with a long term return on investment if they have already paid too much for the freehold interest in the property. Some operators acquire a property with scant regard to the investment value based on the business generated by the operation as a public house and instead pay a price indicative of the aspiration of releasing a latent value obtained on a change of use.

        The Business
        The Cross Keys was a well known pub and restaurant, with its roots going back to 1765, and claimed to be the oldest pub in Chelsea. The pub has a good reputation for food and had evolved into the ‘gastro pub’ style operation following its makeover around ten years ago.

        The property was acquired by the current owners during 2009 for £3m and the business operated under their direct management until closure in May 2012.

        The business was trading lunchtime, afternoons and evenings seven days a week. The pub had a bar and restaurant menu (Appendix 4) and a good selection of wines starting at £14.95 a bottle but catering for Fine Wine tastes up to £140 a bottle. Bar drinks reflected the area and there appeared to be a concentration on higher margin products, encouraging bottled beer sales rather than draught.

        Appraisal of Financial Performance
        Appendix 3 is a summary of the financial appraisals. Included within this spreadsheet are simplified calculations setting out my views as compared to the adjusted represented data margins and Mr Watson’s adjusted margins of this property as a pub, (class A4).

        The accounting information supplied has been prepared in a slightly unconventional manner and I concur with Mr Watson that his approach reconfigures the information enabling analysis of the profitability of the business both on an EBITDA (earnings before interest, tax, depreciation and amortisation) basis and on a net profit before tax basis.

        Customer service charges (tips) paid to staff have been taken out from total net sales. Cleaning would ordinarily be accounted for under overheads, rather than purchases. I have adopted Mr Watson’s credit card commission adjustment, allocating it separately.

        Our analysis of the trading performance of the business is based on the accounts for the year ended December 2011. Appendix 2 outlines management accounts for the business for the period January to April 2012, including the final four months before closure. During this last four month period prior to closure, the trading performance of the business declined, as did the cost of sales, whilst overheads increased. Seasonal trading patterns would be a contributory factor as would the possibility of foreseeable closure. It is noted that there is significant fluctuation in the final month of 2011 and final month of trading.

        Extrapolation of the January to April 2012 figures would no doubt result in greater losses, although given these are the poorest trading months for most pubs and, in light of the latter, the plans to close, it would not be appropriate to base any findings on this extrapolation.

        Turnover
        In the year to December 2011, the business achieved total net sales, exclusive of customer
        service charges of £858,046. This figure was down from £887,589 in the preceding 12 month
        period. The only accounts supplied are for the years 2010 and 2011, and the final 4 months of 2012. The accounts pre purchase, in 2009, or indeed from the purchase date to January 2010, are not supplied, despite reference to management accounts in Mr Watson’s Appendix 2 dating back to 2008, and therefore no evidence has been submitted actually indicating that a pattern of gradual decline in turnover has occurred. Even if there had been a gradual sales decline, this is not uncommon in the pub sector and I would anticipate many other pubs in the area will have suffered similar circumstances.

        It should be noted that the Cross Keys advertised private hire of event rooms, implying an additional income that is not obviously apparent on the accounts reports. I am informed that the ‘hire’ was based on a minimum spend rather than a fixed amount and therefore the event rooms hire would be incorporated into sales for those individual areas.

        I do not consider the subject property suffers from any specific disadvantages when compared with other pubs in the area outlined by Mr Watson and listed under the previous heading ‘Competition’. All of these ‘competitive’ pubs lack the prominence or passing trade of operations located on major thoroughfares like King’s Road or Cheyne Walk, which enhances trading potential. As most, not all, of the competitive operations cited do not rely on passing trade being in secondary quieter roads they would all seem to suffer the same or similar disadvantage.

        It has already been outlined that the nation’s drinking habits generally have changed, for whatever reason and the resident population of the country at large has a diminishing propensity to frequent neighbourhood public houses. The area’s affluence may indicate a demand for higher standards of décor and service and whilst they may be more likely to frequent a restaurant than a pub the subject property sought to satisfy both tastes, the owners describing the Cross Keys as “…being a multi-faceted venue that offers fine dining in a relaxed setting, a classical London bar offering contemporary drinks.”

        I would expect the demographics of the surrounding area are largely unchanged over the recent years and therefore it is unlikely that this has been a contributory factor to the operator’s alleged business failure. Pubs in thoroughfares such as King’s Road cater to a different clientele and have done so for many years. Operations like the Cross Keys will have relied on established trade to a great degree based on their reputation amongst local residents and the turnover of almost £860,000 is demonstrative of a strong trade base despite its decline on the previous year. In this regard, from an online petition which I have reviewed at http://www.savethecrosskeys.co.uk I can see strong evidence of the local community’s goodwill and patronage.

        The current sales are only indicative of the current operators’ achievements. Whilst this shows a healthy level of sales I would have anticipated marginally higher results given the location and area’s affluence. I am aware of the turnover at the The Bricklayers Arms, a Geronimo Inns pub and cited as a comparator. Given their achievements my view is that sales at the Cross Keys approaching around £900,000 are possible. Despite this, I have maintained the current level of sales as the basis for my assessment. Clearly, if another operator were able to achieve a higher level of turnover the viability would be improved.

        Gross Margin
        I too adopt a conventional measure of gross profit, being total net sales, excluding service charges, less the cost of direct purchases of food and drink. This is profit before any wages costs, overheads or financial costs.

        The gross profit margin in the year ended December 2011 was 54%, down from 61.2% in the preceding 12 month period. Mr Watson and I are entirely in agreement that this is low by sector standards for a central London establishment. The Association of Licensed Multiple Retailers benchmark survey indicated that the average freehold operation drinks margin would be to the order of 65.6% and food margin 68.2% assuming a food led pub. Given the location I would anticipate the Cross Keys to be able to achieve higher margins in both drinks and food.

        I certainly have no hesitation in agreeing with Mr Watson that I would anticipate a central London pub/restaurant of this nature to be able to achieve an overall gross profit margin in the order of 68%. With a heavier bias towards food this margin would be expected to improve. The ALMR’s benchmark figures, and indeed my own experience, differ from Mr Watson’s view as margins on food are reportedly higher, not lower, than those on drinks. Even so, it is important to note that Mr Watson and I are in agreement on anticipated margins and that the margins outlined in the accounts bear no relation to what Mr Watson and I would expect or indeed what is considered normal averages in the sector by benchmark surveys.

        Labour Costs
        I also agree that the total staff costs are extraordinary at £397,185 inclusive of employer’s National Insurance. This equated to approximately 46.3% of total net sales. This figure was broadly the same percentage as in the preceding 12 month period.

        Referring to my own experience, backed by the ALMR’s benchmark survey for 2011. I would expect controllable costs, on average, to be higher in the freehold sector. The average payroll costs in the ‘free of tie’ sector are reported by the ALMR at 24% of turnover, although it should be noted this does not include managers salaries which benchmarking identified to be an average of 7.2%, implying a total average labour cost, including managers, of 31.2% . I would anticipate an operation such as the Cross Keys, priding itself on quality of service and generating a good proportion of their income from food may have a slightly higher staff salary costs but 46.3% seems incredibly high.

        I have been informed by the commissioner of this report that he has been told by Mr John Bond, the previous manager, that his annual salary was £30,000. It is possible that the accounted managers salaries of around £100,000 included a salary to the owners. There is much debate on whether manager’s salaries should be included in assessments as an overhead although I would anticipate an allowance should be incorporated in circumstances where the operation has a number of income streams from distinct areas and a relatively high level of sales.

        Mr Watson and I again agree that the accounted overall labour costs seems unrealistic and excessive. Tips have been removed from ‘sales’ in my assessment. I have adopted the same level of staff costs in my assessment as that estimated by Mr Wason – 32%.

        Overheads
        I consider the overall overheads reported in the accounts for this operation to be unusually high at around 70% of turnover in 2011 and 2010. This in the main is solely a reflection of the excessive staff costs.

        I have no dispute with Mr Watson’s logic of adjusting the actual stated overheads to reflect the position for the business going forward. Adjustment to general and water rates, to reflect the actual rating assessment of the property, an insurance cost added and an ongoing sinking fund figure for maintaining the property in full repair and decoration.

        To ensure continuity, I have followed Mr Watson’s repositioning of cleaning costs as well as credit card commission which I agree seems entirely appropriate. Mr Watson comes to an overheads figure of 54.3% of turnover.

        The ALMR benchmark figures would indicate that average total controllable costs (excluding rent) as a proportion of turnover are at 53.2%. As compared with the reported c70% overheads of the Cross Keys something seems to be incredibly wrong. I have adopted the lower benchmarked overhead cost as an estimate which is not dissimilar to that estimated by Mr Watson.

        Net Profit (EBITDA)
        The business is generating a net loss at the EBITDA line (Earnings Before Interest Tax Depreciation and Amortisation) in both 2010 and 2011. On Mr Watson’s estimates of trading performance of the business, an EBITDA profit is achieved of £117,760 (approx 14%). My own estimates reveal an EBITDA profit of £126,832 (approx 15%).

        Net Profit Before Tax
        Mr Watson and I have confirmed, in our EBITDA estimates, that profit on conventional margins would be expected at £117,760-£126,832.

        Mr Watson states ;
        “Although EBITDA is commonly adopted as a measure of profit, a business is only viable if it able to generate a profit after having made a charge for depreciation and after showing a return on property costs, either in terms of a loan repayment or notional (or actual) rent.”

        The approach Mr Watson adopts is contrary to the accepted valuation principles and appropriate best practice in reaching his ultimate conclusion, outlined in the Royal Institution of Chartered Surveyors Guidance Note 67/2010 (“The Capital and Rental Valuation of Public Houses, Bars, Restaurants and Nightclubs in England and Wales”). The guidance states ;

        “Fair maintainable operating profit (FMOP)
        2.4 The level of profit, stated prior to depreciation and finance costs (my emphasis) relating to the asset itself (and rent, if leasehold), that a reasonably efficient operator (REO) would expect to derive from the FMT based on an assessment of the market’s perception of the potential earnings of the property. It should reflect all of the costs and outgoings of the REO and an appropriate annual allowance for periodic expenditure such as decoration, refurbishment and renewal of the trade inventory.

        Personal goodwill (of the current operator)
        2.9 The value of profit generated over and above market expectations that would be extinguished upon sale of the trade related property, together with financial factors related specifically to the current operator of the business, such as taxation, depreciation policy, borrowing costs and the capital invested in the business. (my emphasis)

        Reasonably efficient operator (REO)
        2.10 A concept where the valuer assumes that the market participants are competent operators, acting in an efficient manner, of a business conducted on the premises. It involves estimating the trading potential rather than adopting the actual level of trade under the existing ownership, and it excludes personal goodwill. (my emphasis)”

        I believe Mr Watson makes a fundamental error in this statement by considering either the asset worth of the building or the associated depreciation. The RICS guidance requires valuers to consider ‘fair maintainable operating profit’ – prior to depreciation and finance costs, on the basis of a ‘reasonably efficient operator’ which specifically excludes personal goodwill (i.e. depreciation, borrowing and capital invested).

        Neither asset worth nor depreciation factors are relevant in considering the ‘viability’. Then under the heading “Summary and Conclusions”, Mr Watson states ;

        “If the pub were operating with conventional gross profit and labour margins, it would remain unviable (my emphasis)”
        I disagree. Having worked through our respective calculations, we differ little in our estimate of a net profit EBITDA. However, I do not consider a valuer should then deduct bank charges, interest and depreciation, which Mr Watson then shows as producing an ultimate loss of £28,126. Notably, once it is accepted that bank charges, interest and depreciation should not be deducted from net profit, it is clear that Mr Watson has in fact demonstrated that if operated in a conventional managed house format, the Cross Keys is exceedingly viable.
        EBITDA is commonly adopted as a measure of profit and a business is only viable if it able to generate a profit after showing a return on property costs, either in terms of a loan repayment or notional (or actual) rent. I do not however agree with Mr Watson’s principle of measuring viability against the purchase price (or even an increased estimate of it as of today). I believe EBITDA should determine the possible notional loan repayments, or notional rent, and therefore the potential purchase price given the use and trade, not the other way around as Mr Watson has sought to outline.

        This property was purchased in 2009 for £3 million. Unless the 2009 accounts are substantially different to the 2010 and 2011 accounts – showing a combination of significantly higher turnover, higher margins and much lower costs, it would seem the notional repayments or rent necessary to support the purchase price were never apparent or indeed likely. In view of the latter, it seems probable that the purchase price of £3 million was an over valuation given its existing use as a public house, and its trading potential. It may be the purchaser was simply over optimistic or poorly advised on the freehold purchase. I consider the price paid is not reflective of its viability as a pub but is instead likely to contain a degree of ‘hope’ value for alternative use by releasing latent value if redeveloped.

        As to the margins and overheads, Mr Watson and I broadly agree that the Cross Keys would certainly be viable as a public house in the ‘gastro style’ previously adopted but would not sustain loan repayments, or an open market rent (OMR), likely to be commanded by a purchase in excess of £3m.

        If valued on its likely OMR value the investment value would be nothing like £3m – put simply it appears the purchaser over paid. That does not in my opinion render the pub non viable.

        Summary and Conclusions
        Mr Watson and I agree that the accounts show that the current pub business is operating at unusually low margins and unusually high costs and on this basis it would be non viable.

        If the pub were operating with conventional gross profit and labour margins, both surveyors have concluded it would be viable based on EBITDA. We are to consider the fair maintainable operating profit (FMOP) of a reasonably efficient operator (REO). RICS guidance specifically requires that the valuer disregards taxation, depreciation policy, borrowing costs and the capital invested in the business when calculating FMOP. This precise point is argued by all valuers in establishing an FMOP for rent assessment purposes and lease agreements specifically require the disregard of these factors.

        No evidence has been supplied to suggest the nature and demographic of the surrounding area will change or has changed over recent years. General trends in the pub sector indicate that whilst trading is tough, those with a strong food offer and capable of purchasing drinks at ‘free of tie’ prices, and who are therefore able to obtain wholesale discounts, are the only growing sector and therefore most likely to succeed in the foreseeable future. I consider the Cross Keys, benefiting from the latter combined with its heritage and clear local resident demand and support would be well placed to constitute a viable operation.

        Concluding Remarks
        I hope my findings and observations are helpful to you, and I look forward to addressing any subsequent questions you may have in connection with this report.

        Should you require any further information or clarification please do not hesitate to contact me.

        Yours faithfully

        Appendix 1

        Curriculum Vitae

        Name Simon James Clarke

        Position Director

        Company Morgan and Clarke Chartered Surveyors
        104 Chatham Road
        Battersea
        London,
        SW11 6HG

        Qualifications FRICS – Member of the Royal Institution of Chartered Surveyors

        Other Roles RICS – Member of guidance drafting team for GN67/2010
        “The Capital and Rental Valuation of Public Houses, Bars,
        Restaurants and Nightclubs in England and Wales”
        This group was responsible for redrafting the RICS guidance on
        valuation of licensed premises, outlined above

        Field of Expertise Public Houses valuations particularly in London

        Appendix 2

        Information Supplied & Relied Upon

        CKPH Ltd – Management Accounts for the Year Ended December 2011 (monthly)
        CKPH Ltd – Management Accounts for January – April 2012 (monthly)

        • Patrick says:

          you really need to get a life. have you really got nothing else better to worry about than some crap pub closing down?

          • Richard says:

            You’re. The one who needs to get a life. Have you nothing better to do than worry about someone who cares about a great pub closing down. What’s you angle? Did he use too many long words for your very small mind. Maybe he should gave said” it’s good not crap”? Capiche?

  33. Doug Shaw says:

    The Cross Keys was losing money as a oub presumably because it sold beer too cheap and/or not enough of us ever went there. So what should we expect these premises to be used for? We can’t force the owners to keep losing money.

    • John says:

      are you trying to say that if you run a business on a premises and you lose money then you should automatically be granted change of use?

      what about all the restaurants that go bust… should they all be turned into houses and flats? and what if you work out of an office in chelsea… you wouldn’t be able to turn that into a house if you made a few bad business decisions would you.

    • John says:

      Please see independent surveyors report in the above post. it might answer some of your questions.

  34. Michael Jones says:

    I would like to enjoy a nice pint when i visit Philip.
    End Of Discussion

  35. Anthony says:

    ..and god forbid our grandchildren might be campaigning against ‘yet another new noisey anti-social pub in a quiet residential community’!

  36. PW says:

    I have signed this petition. HOWEVER:
    I am quite concerned that this petition has created a lot of division, from people I have spoken to on this topic ( loads and loads) there seem to be just as many people opposed to the loss as to ” accepting modernity and market forces.” This petition differs from other sucessful petitions in that should the “developer” have started his own petition and canvassed with the same energy as this one, my money is on that they wouldl have gathered similar support. very worrying indeed. I am also concerned that the focus has been the loss of community use ( which i can tell you as a local it isnt, aside of the weekend the place is DEAD!!) I would focus on the loss of employment etc

  37. Anthony says:

    I think we’re now actually getting a debate based on the reality as opposed to nostalgia for something none of us actually experienced.

    Firstly as a regular I can confirm there weren’t 1,200 others whose faces I would recognise. Did anyone drink there often enough to get to talk to the owners, they had the office upstairs and came down regularly. You could have spoken to them when they applied for planning permission, they asked all the customers. By the way the permission was approved by planning and conservation officers it was overturned by councillors who know its a vote winner to be seen to protect ‘community assets’ but what community, not enough of I’d drink there. It was bought off a brewer as a distressed asset and they tried to sell it back to them when they realised it was losing so much but no one wanted it.

    Secondly on changes of use, Georgian and Victorian buildings and houses lend themselves to changes of use over time. How many of us have worked in what was a Georgian house, how many of us live in old warehouses, reconfigured churches, clerks office buildings, telephone exchanges etc. the beauty of good sensible architecture is that it’s flexible enough to change with society’s evolvement. As a society and certainly as a community we have changed, we don’t drink in pubs as much as we used to, as working class ‘clubs’ often the only place for the neighbourhood to meet, gain entertainment and stay warm they have lost their real purpose. Allow them to be turned into whatever use is suitable and with Londons population now back to what it was before the 2nd world war and growing housing seems a good idea.

    Who knows in two or three generations it might turn back into a pub.

  38. Anthony says:

    Is the last thing Ive written too long, why aren’t you uploading it. I think it really helps the debate.

  39. James Woodward says:

    For once just once, please can the feelings of the community be placed ahead of those of developers? This is a wonderful asset for the area which has always been popular and I am sure will continue to be so if allowed to survive. How will a new block of flats help the community? Will its swimming pool be available for the use of everyone? It’s not very probable. An area is popular because of its character. Will a much loved pub add more to the character of an area than an apartment block? For me the answer is obvious.

  40. Anthony says:

    Thankyou editor !…unfortunately they read on the wrong sequence now but I’m sure it’ll make sense …thanks, appreciate your goodwill.

    • John says:

      no worries anthony, i’ve posted all your comments. and specifically answered one of your main questions regarding the viability of the pub. you’ll see it in the post above

      it would appear from the report that a premium was paid for the pub when it was bought.

      it is possible that an “uplift in value” should the pub be granted change of use is the thing that justified that premium.

  41. Oleg Desh says:

    Let’s keep that welcoming fire in the X Keys fireplace going. The silence on Lawrence Street in the evenings is ominous. Put up the price of drinks if you like but give us the choice please.

  42. John says:

    message for PW or “professorgj@” if you want to make comments we need an email address that’s genuine and that works. thanks

  43. PW says:

    RE: the viability report, though i am glad that this was done, i don thtink Simon Clark has written it very well. IMO there is too much speculation about the latent value etc
    Is there any way he can have another go at this in time for the hearing? I woudl be happy to help him make it read better.

    He kind of admits that he is a semi regular at the xkeys, not sure thats a good thing…

  44. Paul Aitkenhead says:

    Sadly, for many years Chelsea has been a rich feeding ground for developers and this has resulted in a lot of rather insensitive characterless renovations. Most Developers are not interested at all in the community spirit and could not care a great deal about the affect on the community that the loss of yet another Public House would cause. I urge people to resist this latest attempt to close one of the most established Public Houses in Chelsea.

  45. Sophie Coronini says:

    An area such as the heart of Chelsea only remains vibrant precisely because of hidden gems such as this pub….

  46. laura jamieson says:

    the question is not just about saving a Chelsea landmark but the fact that Chelsea has developers all over it like a measles rash…houses, flats, pubs, post offices have become commodities to be traded at the expense of the quality of the local environment and spoiling what makes Chelsea unique with corporatism & quick profits coming first. The council planning department have to get a grip and stop this decline.

  47. jay kay says:

    Oh Dear,,, a part of me is actually beginning to feel sorry for all the homeless Chelsea sloane’s who will have no Local pub to go to, and no where to pretend how working class they really are by wearing an old shirt and beaten up Suede loafers.. But giving it all away with a Coutts card!!!… Maybe i’ve been a tad harsh on you Inbred Villagers. As a self made millionaire and a resident of Chesea that likes to flaunt it i think back to the importance of pub going in a local community etc etc!!!… Oh Damn it!!.. against all my progressive principles i’m going to say…… wait for it>>>>>>>… SAVE THE CROSS KEYS!!!;)

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