The signs are all around us that summer is approaching. Wimbledon, intermittent rain, steadily less intermittent children. But is there time between packing and twisting your ankle at sports day to fit in another deal before everyone melts away?
The Center Parcs sale has been attracting attention this week but, as they say of fallen starlets, for all the wrong reasons. A number of interested parties have backed out, leaving, according to popular rumour, GIC and KSL as pack leaders (usual hotel gossip caveats apply).
But what has happened? Is £4bn just too much? It was £5bn when the sale was first mooted. The Times reported that the process was suffering from “a sharp downturn in private equity dealmaking”.
The sharp downturn has been caused, yes, by expensive money, but also because of a lack of the usual type of property private equity likes to buy: creaky old properties which can be spiffed up, with a few added on the side making what they like to call ‘a platform’ and then sold on to, well, usually another private equity company.
It’s a model which has kept everyone in the private sector happy and well within their goals for years now, but the pandemic has put a number of spanners in their five-to-seven year works (Brookfield Property Partners has been holding onto Center Parcs since 2015, when it paid £2.4bn and really, that’s just too long), not least that nothing suitable is coming to market: thanks in part to government support as well as pent-up demand spiking rates. There’s just no reason for people to sell.
This should not affect Center Parcs, which should surely remain part of the private equity merry-go-round. It’s also part of the domestic outdoor-driven leisure set which has so enthused investors since the start of the pandemic and KKR’s purchase of Roompot for €1bn. See also: Blackstone’s acquisition of Bourne Leisure for around £3bn and CVC Capital Partners £250m deal for holiday park operator Away Resorts.
Despite holding onto Center Parcs for longer than is habitual, Brookfield has been able to dry its tears on the many £50 notes it has been bringing in as holidaymakers go all domestic, something which, given the uneven impact of the cost of living crisis, are likely to continue for the foreseeable.
So far, so attractive for a buyer with cash. It makes money and it’s dead on trend. But what about the other requirement: expansion potential.
Earlier this year the group pulled out of a scheme in West Sussex after ecological and environmental surveys found the area was not suitable.
Colin McKinlay, Center Parcs CEO, said: “We have always been committed to only building our villages in areas where we can improve the biodiversity of the site. Whilst it is obviously disappointing that we will not be able to bring Center Parcs to this part of West Sussex, this decision demonstrates how seriously we take our responsibility to the environment, as well as our ongoing commitment to enhancing the natural habitats in which our villages are located.
“Through our customer insights we are confident that there is strong demand in the UK market for a sixth Center Parcs village and, with this in mind, we will continue our search for a suitable site.”
The company has run up against objections to its developments before and is likely to do so again. This, plus their cost, makes Center Parcs something of an expansion challenge.
The group also enjoyed something of a monopoly in terms of decent upscale outdoor leisure. This is, happily, no longer the case in the UK. Show me a manor house and I’ll show you someone thinking about buying it and offering locally-sourced food, drink and probably a hearty guided hike.
The consumer, the sector has found, doesn’t always need to swim under a dome and get away from the weather. Authenticity is king. Center Parcs will always have a market, but its generic F&B and lack of, well, knowing where on earth you are once you’re inside, means that it is no longer attractive to many of those rediscovering domestic travel.
The rejuvenation of UK holidays could leave what used to be the only leisure option behind.