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* Managed pubs to grow to 850 from 16
* Commercial property arm to grow to 1,000 properties
* Changes in response to new rent options for tenants
* Shares up 0.8 pct
By Neil Maidment
LONDON, May 12 (Reuters) - British pub landlord groupEnterprise Inns plans to sell 1,000 pubs, create a largeproperty rental arm and expand its own managed pubs unit inresponse to a new tenant law that stands to hit profits.
The law will allow publicans to choose where they buy theirbeer, threatening future profits of landlords who under a systemknown as the "beer-tie" charge tenants above-market drinksprices and offer subsidised rent and benefits in return.
That system is in operation in nearly half of the UK's50,000 pubs but publicans will in future be able to buy beerfrom other suppliers and choose a market rent-only option.
Enterprise Inns said it would continue to offer tied dealsbut also boost the number of pubs it manages directly to between750 and 850 by September 2020 from 16 now.
Managed pubs, which have higher costs attached but offergreater profits, have become a focus for many pub firms as theyrespond to competition from cheaper supermarkets, a recessionand Britain's smoking ban.
"This is a fundamental change in the business... it doesappear Enterprise has grasped the nettle post the Market RentOnly option," Cenkos analyst Simon French said, forecasting halfof the group's earnings would come from managed pubs by 2020.
Enterprise Inns said it would also expand its commercialproperty arm, which includes free-of-tie pubs as well as retaildevelopments, to between 900 and 1,000 properties from 185currently.
The firm's shares, which have risen 23 percent in threemonths in anticipation of the update, were up 0.8 percent to 133pence at 0742 GMT.
Overall, Enterprise Inns will slim down to 4,200 pubs from5,200 by 2020, it said.
Disposal proceeds, raised to 75 million pounds ($117million) for this fiscal year and next, would be reinvested tohelp cover the 150 million pound cost of the first stages of theoverhaul, it said.
Enterprise Inns posted a 0.6 percent rise in like-for-likenet income for the six months to March 31 and core earningsbefore exceptional items of 144 million pounds, in line withexpectations.
It said it was targeting full-year underlying net incomegrowth.
($1 = 0.6416 pounds) (Editing by James Davey and Jason Neely)
