Distressed deals drive leisure market, says Christie

THE value of property assets in the leisure market declined by 2.5% in 2011 driven by an increase in the number of distressed sales, according to agents Christie & Co.

Presenting its annual Investment Outlook in Manchester last week, the agency said that 25% of the sales that it made in 2011  had a distressed background, and UK managing director Simon Hughes said: “We expect banks to continue driving activity over the next few months.”

Mr Hughes added that access to bank debt “continues to be a massive issue across all sectors”, and pointed to the fact that of the 21 hotels it sold following the administration of the Von Essen country house & hotels chain last year, only two of them required any element of debt funding while the rest went to cash buyers.

Overall, Christie & Co said that values in the hotels market had dropped by 5% outside of London, and that the “difficult” lending market had generally slowed the number of transactions.

In the North West, however, the firm completed £55m of hotel sales last year – as many as in 2010 and 2009 combined.

“The majority of the disposals were bank-driven, though not all through administration,” he said.

Its most high-profile sale in the region was the sale of the Free Trade Hall building in Manchester to Jasminder Singh, who owns the Edwardian hotel company that manages the Radisson Edwardian hotel building at the site.

Christie + Co also acted on the sale & leaseback deal for three Malmaison hotels (including Manchester) and the Mint Hotels business to private equity firm Blackstone, which has added them to the Hilton hotels portfolio.

The pubs sector saw prices fall by 1%, with Hughes arguing that demand for decent freehold pub properties was still “excellent”.

It completed 150 pub sales in the region, and the number sold where the buyer intended to continue operating the business as a licensed premises increased by 4% to 64%.

Regional deals included the purchase of a number of barks in Liverpool from the administrators of Liver Leisure and Liver Cafe on behalf of Peacock (NW).

The average price of restaurants dropped by 4% and “remains price-sensitive” in the region, according to Hughes, though all of the restaurant units it disposed of in the region last year attracted a premium for the lease assignment.

The firm’s leisure team in the region enjoyed a particularly strong year, advising on the sale of the Pontins business and its five sites by administrators KPMG to Hale-based Britannia Hotels Group.

It also advised on the sale of the Blackpool Bowl ten-pin bowling alley for administrators Bennett Verby, and the sale of the 650-capacity Spirit bar and nightclub to London-based G-A-Y Group by Begbies Traynor as administrators for Cougar Leisure, among others.

Hughes said that the nightclub sector had been “particularly subject to distress…and we expect to see more in 2012” due to lower levels of discretionary spend, particularly among younger people.

The gyms and health club business – in which it sold the two GL14 outlets owned by The Livesey Group to Bannatyne Fitness – is also likely to see more customers migrating onto cheaper deals due to the rise of budget gyms chains like The Gym and Pure Gym.

The value of care homes deals fell by 3.3%, while prices in the retail convenience sector fell by 3.6%.

“Having weathered the storm better than it continued to perform reasonably well in in 2011, despite a negative price movement,” said Hughes.

He added that many independent retailers moved into buying groups like Costcutter and Spar for added security as major supermarket groups like Tesco, Sainsbury’s, Morrisons and Co-operative Group stepped up their move into the convenience store market.

“In the North West, we experienced consistently good demand for profitable, self-financing convenience stores, filling stations and CTNs, and the post office market remains attractive for those seeking a guaranteed income.”

Mr Hughes concluded: “While 2012 is not going to be easy, we do believe there will be some fantastic opportunities for buyers, and for sellers who are able and willing to be realistic about price, there are plenty of cash-rich buyers out there.”