Pub operator Mitchells & Butlers is going ahead with a conversion to low-tax real estate investment trust (REIT) status, to unlock the value of its estate.

Converting to REIT status allows companies to separate their property from their operating business and lowers their tax rate.

Investors reacted favourably to the news, and shares in the company were up 2.59 per cent in early afternoon trading on the FTSE 100.

Mitchells & Butlers said it would implement a REIT structure “when market conditions are suitable” and would appoint two non-executive directors from Robert Tchenguiz’s investment vehicle, R20.

Tim Smalley and Aaron Brown will join the company in June, and will form a property sub-committee, then transfer to the REIT when the separation takes place.

Entrepreneur Mr Tchenguiz has a 27 per cent stake in the pub chain, and has been pushing for REIT conversion for some time.

Chief executive Tim Clarke said: “The comprehensive strategic review has explored all options for creating value.

“The conclusions reaffirm our commitment to capturing the value of the property for shareholders. We will also focus on accelerating our trading out-performance and pursuing consolidation in managed pubs.”

Mitchells & Butlers also said profit before tax in the first half dipped 5.6 per cent to £84 million, while revenue was flat at £995 million.

Sales growth has been “resilient”, the pub operator said, with same outlet like-for-like sales up 0.8 per cent for the 32 weeks to May 10th 2008.