Leisure Property Specialists UK Leisure sector – Q3 2014 Summary Q3 2014 has followed the previous six months of the year with increasing corporate activity from all segments of the UK leisure sector. Whilst the political parties may already be gearing up for the general election in May next year, any potential uncertainty which may arise from a change of Government does not appear to be lessening the appetite of investors in the UK leisure sector. 2014 is likely to deliver a vintage performance for corporate M & A activity. Recently revised data from The Office for National Statistics confirmed that the UK economy grew 0.9% in Q2, with the economy surpassing its pre-recession peak in the third quarter of 2013, six months earlier than previously estimated. Whilst real term wage growth remains largely absent across the country, this has had the benefit of keeping inflation in check. The continued strength of Sterling, particularly against the Euro, has further increased overseas investor appetite for I have worked with the Fleurets consultancy for many years across both managed, leased and tenanted and hotel channels. As a practice they are at the vanguard of the sector, and show both leadership and innovation across both agency and professional services “ ” Chris Moore Property & Strategy Director Star Pubs & Bars the leisure property sector, as foreign based buyers acquire iconic London leisure properties, demonstrated by the sale of the Gore and Pelham hotels to the Italy based family hotel group Starhotels. Activity of this nature is well supported by improving, and in many cases, strong trading results from the UK’s major leisure operators. Within Q3 Marstons reported a 4.1% rise in like-for-like sales in its destination and premium arm, whilst Fullers reported a 7.3% rise within its managed pubs and hotels division. Whitbread saw like-for-like growth of 9.2% at Premier Inn, and 7.3% at Costa. Travelodge also filed accounts during the period which showed the budget hotel chain moving back into profitability as turnover rose to £426 million. With improving economic and trading conditions and confidence from buyers and lenders, leading to more fluid lending, the level of transactional activity across the sector is likely to continue. UK Leisure Sector Q3 2014 Highlights Date July 2014 Sector Hony Capital, a Chinese private equity firm, acquires Pizza Express in a £900 million deal, the largest transaction in the European restaurant sector for five years. Pizza Express subsequently re-finances raising £610 million, split between secured and unsecured debt. Italian Hotel Group, Starhotels, purchase two central London boutique hotels for £43 million, including the Gore Hotel and Pelham Hotel in South Kensington. De Vere Group formally launches the sale of its Village Hotel chain for an estimated £250 million, comprising 25 hotels and 3,100 rooms. Blackstone Real Estate Partners acquire assets including 29 Enterprise Inns sale and leaseback investments within Central London. No Saints, the operator of Wonderland nightclubs and Jam House led by Luminar founder Stephen Thomas, completes a pre-pack administration. No Saints existing management bid £1.73m for the seven trading sites under a vehicle called Exeat Leisure. August 2014 Marathon Asset Management acquire 11 QMH UK hotels operating under various brands including Crown Plaza and Holiday Inn. Goldman Sachs, Avenue Capital and Goldentree Asset Management acquire a portfolio of 144 investments let to Travelodge for a reported £520 million. Cerberus acquire 63 pub investments let to the Spirit Pub Company in a transaction reported at £200 million, reflecting a Net Initial Yield of 6.5%. September 2014 Hugh Osmond returns to the restaurant sector acquiring 43 Strada restaurants from Tragus for £37 million. Fulham Shore, the David Page led investment vehicle, conditionally acquires The Real Greek Restaurant Group for £13.9 million and seeks admission to the AIM. Hotel operator, Kew Green Holdings, purchase 19 Holiday Inn hotels across the UK providing 2,335 rooms for a reported £100 million. Punch Taverns’ shareholders and bond holders approve debt restructuring proposals. The re-structure will reduce total net debt by £0.6 billion. Heineken UK agree to sell 111 pubs from its Star Pubs & Bars business to Admiral Taverns. Spirit Pub Company confirms it has rejected a 100p per share offer from Greene King concluding that it significantly under-values the company. Rileys Sports Bars placed in administration two months after its owner, Greybull Capital, acquires the business through a pre-pack administration. Electra Partners buys The Original Bowling Company for £91 million. The company operates 43 sites under the brands Hollywood Bowl (29) and AMF Bowling (14). Electra Private Equity PLC invested £51 million of equity in the deal with debt provided by GE, Barclays and Lloyds. Contacts Graeme Bunn Director Martin Willis Managing Director T 020 7280 4740 E [email protected] T 020 7280 4759 E [email protected] © Copyright Fleurets – October 2014 fleurets.com