Never before has Huw Pendleton known such an interest in Celtic Holiday Parks. In the two decades since the Welshman started his business, two or three potential buyers may contact him each year, but over the past six months alone, he has been approached by more than twice as many.
Celtic, whose three premises in Pembrokeshire house static caravans and wooden lodges, is an attractive investment for international financiers, who often manage billions of dollars in funds, who are increasingly eager to buy at Britain’s local holiday market. The business owns the freehold for its premises and has planning permission to add 100 sites to its existing 520.
“The potential adaptability of the park business does mean that it is a very attractive proposal for finance houses that have recently adapted the industry,” Pendleton said.
The UK’s holiday park sector, sometimes regarded as the poor cousin of the foreign holiday given its lower cost and the country’s volatile weather, has enjoyed its hottest year yet for deals, operators and agents say.
Private equity groups are piling up, having seen an opportunity to merge small and relatively inexpensive premises into larger businesses, add debt to their balance sheets and sometimes put their freehold in the process sell.
Black stone paid around £ 3 billion for Bourne Leisure, which includes Haven Holidays, in January and plans to add smaller operators to the group. In June, CVC Capital Partners Bought out of town for £ 250 million then in August Aria Resorts and this month snatched up Coppergreen Leisure to combine with it.
The US real estate investment trust Sun Communities paid $ 1.3 billion for Park Holidays in November, indicating further transactions, indicating a “significant external growth opportunity” in the “highly fragmented UK market”.
Possible targets include Parkdean Resorts and Park Leisure, which are for sale, with the latter likely to fetch more than £ 175 million, according to a person involved in the negotiations.
Independent owners sell at record valuations. Simon Altham, commercial head of holiday rental company Awaze, said every time a park business is sold, owners across the industry make “obsessive calculations” about what they might receive for their business.
The real estate agency Savills estimates that holiday parks have traded 20 to 30 percent more than they could have achieved in 2019 since Blackstone’s deal with Bourne Leisure in January 2021.
“We’re seeing premiums and multiplication achieved over the past 12 months that we’ve never seen before,” says Chris Sweeney, director of Savills’ recreation team. “It’s a perfect storm. . . You have existing operators who want to expand and new players in the market such as private equity who can see good investments and retirements. ”
The UK, where planning laws are favorable, is home to around 6,000 holiday parks, according to Savills, which generates around £ 9.3 billion in visitor spending ahead of the pandemic, research by the UK Caravan and Camping Alliance shows.
Some are specifically geared towards caravans while others offer accommodation from multi-room lodges to shepherd huts. Groups of more than 10 parks make up 7 percent of the industry, Savills said. Much of the rest consists of independent owners of one or two sites, making the sector ripe for consolidation.
The pandemic “snatched a bunch of family owners from their slumber,” said a person who worked on several park transactions. “They have been saying for 30 or 40 years that they do not want to sell and now they think, if it were not for that. [state-backed loan] I would have died. ”
Holiday parks offer easy profits. They are easy to refurbish, enabling operators to increase prices by adding more accommodation, whirlpools, plasma screens and WiFi.
In a time of uncertainty and rising inflation, parks are also less affected by travel restrictions and economic pressures. “If the economy is doing well, people are adding a holiday to the UK. If the economy is slightly challenged, people are taking holidays at home rather than abroad,” said Awaze’s Altham.
Parks also lend themselves well to financial engineering. Smaller plots or groups can often be purchased for a lower multiple of their earnings than a larger company, so buyout groups hope to bring the difference into their pocket and gain economies of scale by merging a number of plots. Local businesses such as veterinary practice and dental surgeries were similarly consolidated.
Parks ‘freehold property can also be sold and leased back, increasing owners’ returns and bringing in cash in the short term, while businesses are bound for decades to pay rent. Since 2017, Parkdean, Park Holidays, Park Leisure and Away Resorts have been selling freehold to outside investors, according to the company’s entries.
Typically, such transactions are done either before a buyout group sells a company “as a way to crystallize the value”, or by an incoming private equity owner as a way to pay for the acquisition itself, Tom said. King, head of British hospitality investment properties, said. at real estate consulting CBRE.
Buy-out groups have achieved mixed success in the sector. Caledonia Investments said it nearly tripled its money on Park Holidays, which it owned from 2013 to 2016. That equates to an annual return of 39 percent, according to Peter Morris, an associate student at Oxford University’s Saïd Business School, which analyzes private equity buyouts.
But those who invested in the run-up to the 2008 crisis fared worse.
San Francisco-based firm GI Partners bought Park Resorts for £ 440m in 2007, but five years later handed over control of UK-based Electra Private Equity through a debt restructuring, after Electra spent £ 70m to buy off its debt. . GI declined to comment.
CBPE Capital’s return on Away Resorts, which it owned between 2008 and 2015, was about 7 percent a year, slightly weaker than the FTSE 250 index in the same period, Morris’ analysis shows. CBPE declined to comment.
And while park owners are reporting record bookings for 2022, some fear the boom will not last.
“Private equity firms and especially their lenders like to say that holiday parks in the UK are recession resistant,” Morris said. “Actually, investing in holiday parks is mostly about the same two things as every other property-based investment – location and timing.”
But in Pembrokeshire, on the south-western tip of Wales, Pendleton feels confident, after spending £ 2.6 million to upgrade his sites – more than five times his normal annual development budget – while they were empty during lock-in. The “many different income streams” that are available, such as caravan rentals and restaurant sales, can help the parks sector to withstand turbulent times, he said.
Despite Covid emotionally causing “a real roller coaster,” Pendleton said he was still “too young” to sell and retire at 50. But he quickly added, “You do not want to miss the boat.”