With two large European Center Parcs portfolios on the market, you would think it makes sense for one investor to buy them both and create a massive £5 billion-plus portfolio of holiday resorts in the UK, Ireland, Belgium, Germany and the Netherlands.
But that is unlikely to happen due to the different ownership structure of the two entities. The UK and Ireland portfolio is owned and operated by Canadian investor Brookfield, which bought the business for about £2.4 billion in 2015 from Blackstone Group. A new owner will be in full control. Potential bidders for the portfolio include Aermont, Ante and a consortium of GIC, KSL and CVC Capital Partners, according to Sky News. The news service had also tipped Blackstone as a contender. However, CoStar News understands the US private equity giant did not submit a bid on Tuesday.
The UK and Ireland portfolio comes with fresh debt. Earlier this year, Center Parcs successfully refinanced a number of maturing bonds, as reported. The bonds have a change-of-control clause, which means that the debt moves over with the property to the new owner.
The Continental portfolio, however, is owned by Aroundtown, which bought seven resorts in Belgium, Germany and the Netherlands from Blackstone for around €900 million in August 2019. Blackstone, in turn, had acquired the properties in 2006 for €630 million. Today, the properties are operated by Pierre et Vacances.
“You want to own the opco and the propco,” said a source familiar with the situation. “There are also no obvious synergies [between the UK and European portfolios].”
“You would have to put Humpty together again,” said a second source familiar with the situation, referencing a famous English nursery rhyme.
The second source and a third source said Pierre et Vacances is unlikely to give up control. It runs 29 Center Parcs in four countries and the business accounts for 61.2% of the €808 million in revenue it reported from 1 October 2022 to 31 March 2023. The holiday operator posted a loss of €104.4 million during the same period. The financial position of Pierre et Vacances may put off potential buyers, said one of the sources. Although Aroundtown launched a formal sales process recently with the appointment of Eastdil Secured, the circa €1 billion portfolio had been offered to various investors since last year.
The UK portfolio is seen as highly attractive because it benefitted from the staycation boom after lockdown. In February, Center Parcs UK Finance Limited reported revenue of £426.6 million for the 36 weeks ended 29 December 2022, up from £354.8 million a year earlier. Net profits rose to £98.5 million, up from £67 million. Occupancy increased to 97.3%, in line with pre-COVID levels.
The big question is whether rising living costs will put a damper on that. In May, inflation in the UK remained at just below 9%, whereas the market had expected a drop. Inflation is much higher than in the US, France and Germany. Consumers will be making cuts to meet the rising costs of living. The Bank of England is expected to further hike interest rates, which will cause more financial pressure on homeowners looking to refinance their properties.