Market Insight Leisure Parks
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MARKET INSIGHT LEISURE PARKS Monday this week saw the The CVA, amongst a host of approval of the proposed Company other proposals, provided for Voluntary Arrangement (CVA) of the exit of 148 leases identified The Restaurant Group (UK) Limited as Category 4 by no later than by its creditors and shareholders. March 2021. Alongside this, the More than 82% of all creditors parent plc company also placed voted in favour of the proposal, into administration Chiquito with 75% approval required for Limited in April 2020, including the CVA to proceed, giving clear 61 restaurants trading under this support to the managements’ brand across the country. plan to take a large cut through the company’s leisure estate Whilst not all are located within which comprises about 313 leisure parks, the vast majority of branded restaurants, including 236 the restaurants within Chiquito and restaurants operating under the within Category 4 of the proposed Frankie & Benny’s brand. CVA are located in out of town Cover image: Woodside Leisure Park, Watford This page: Valley Leisure Park, Croydon leisure parks. The consequences are 35 7% that it is not inconceivable that over 200 substantial restaurant premises 3 6% formerly operated by The Restaurant 25 5% Group will remain closed long after other competing businesses have 2 4% However, this conclusion would be not reopened post Covid-19. These sales growth Like for % Like only overly simplistic and convenient, units will sit empty, untenanted and 15 3% but also staggeringly myopic as it with many institutional landlord’s would overlook key issues of excessive 1 scratching their heads as to what 2% supply, over development of leisure they can do with previously highly 5 1% park schemes within locations and rented units. The head scratching catchments which simply never will not be happening in a small 0 0% provided sufficient population to number of property companies. The enable even the most successful list of landlord companies reads like 1% operators to trade profitably. The fault a list of Who’s Who in the world of is collective. Developers, planners, Number of New Leisure ark Sites ark Leisure New of Number 2% commercial property, with pension tenants, investors, and even central funds managed by Threadneedle, 3% Government for over seeing planning Prudential, Legal & General, Aviva, policy which enabled fundamentally Standard Life and Canade Life all hit. -4% poor schemes to be given permission As are the pension funds of some in the first place. 2019 2011 2012 2013 2014 2015 2016 2017 2018 of the best known companies in the 2010 UK including Tesco, BAE Systems Source: Annual Report & Accounts A review of the location of the 200+ and Associated British Foods, owner restaurants identifies 20 parks where of Primark. Throw in seven Council multiple restaurants from within for good measure. Even the Queen the Group will now lie fallow and via the Crown Estate is lamenting No doubt these latter additions to with a consistently disappointing potentially long term vacant. The the decline of the leisure park as we the estate will form the majority trading performance exposing position is most pronounced at two know it. of those which will now lie vacant. fundamental issues across our three parks where three restaurants will fall. Whilst many landlord’s and observers main Leisure brands”. Jarman Park in Hemel Hempstead is Only as recently as 2015 did the will apportion blame for destruction one of these two parks. impressive trading performance of The of value for all stakeholders firmly Roll forward, it is perhaps hardly Restaurant Group warrant continued at the feet of the now replaced surprising that the new Executive The Frankie & Benny’s, Chiquito’s acquisitions. A cursory glance through Executive Management Team, a review Management Team have sought to and Coast to Coast are interspersed the Annual Report for this year of Annual Report only 12 months not only right the mistakes of previous by Nandos and Bella Italia, leaving a highlights the opening of 31 new later illustrates frank awareness of the management but also position the terrace of 5 large restaurant units with restaurants within the Leisure Park problems self-inflicted with Chairman, business with the best chances of only two in occupation. division of the company, amongst them Debbie Hewitt only 12 months into recovery and without a tail so heavy 14 new Frankie & Benny’s and 9 new her role, commenting that “2016 and long that it brings down an A significant rental void is already Chiquitos units. was a challenging year for the Group otherwise sound business. accruing for the landlord, Tesco Jarman Park, Hemel Hempstead Pension Fund. We estimate total previous rental commitments of £400,000 per annum (c£30 psf). Whilst short term liabilities in relation to service charge will continue to be met, beyond March 2021 these liabilities will fall to the landlord. Add in a combined Rateable Value of £403,000 for these three units, and soon the landlord will be swallowing hard to accommodate a net income decline of close to £650,000 from rent, rates and service charge. The immediate outlook for new occupation and fresh optimism is difficult to find. The Restaurant Group themselves have been seeking over a number of prior years to dispose individually of significant number of their leisure park estate. The scale of the CVA indicates that they were not wholly successful in this programme. The lack of a material number of purchasers being a key issue. As supply of opportunities have maybe only a handful of sites will be branded restaurant sector. Greggs, Tim already have a drive thru restaurant exponentially increased, the pendulum picked up by these operators. Hortons and Creams in addition to a and many may also have restricted between supply and demand has further number of coffee operators seeking to covenants prohibiting the landlord swung in the direction of would be Imaginative asset management tap into the drive thru market, led by from developing further units for a potential tenants and the phrase ‘buyers initiatives will be needed. Perhaps the Costa, provide comfort that the longer competing drive thru operator. market’ has perhaps never been so apt. easiest to execute would be the sub- term reoccupation is indeed possible, division of the units. Most of the units even though income voids might be Extending the net wider, the locations Landlord’s will need to look beyond the likely to fall back into the landlord’s lengthy (either from marketing or rent with readily accessible and plentiful most obvious relet as a branded casual hands will be around 4,000 sq. ft. free) and investment required by the car parking will appeal to many of the restaurant. Whilst perhaps Nando’s, Sub-division into two, or perhaps even landlord’s to reconfigure the units. low cost gym operators. However at TGI Friday’s and Five Guys are the three units greatly widens the potential rent of probably half of that previously most likely to acquire out of a rather occupier pool into a market which is, Appetite from the wider drive contracted when occupied as a shallow pool of potential acquisitive perhaps not firing on all cylinders, but thru market will remain constant restaurant, re-letting to the gym/D2 restaurant operators, the reality is that infinitely more competitive than the although many of these sites will occupier pool will come at a price Tamden Centre, Colliers Wood are split to the rear leaving the front suggest that in a relatively short period portion of the unit with 100% of the of time a few Frankie & Benny’s could retail frontage, whilst the rear portion well be replaced by Amazon Go. hides away in the “cheap space”, providing ideal space and with ready The approval of the CVA has left many access to delivery aggregators. landlords with much to ponder. Whilst the last four months have given time Salvation may also come in the unlikely to consider a strategy, those landlord’s guise of Aldi and Lidl. The constant wishing to take swift and proactive expansion plans of both supermarket action are more than likely to reap the operators have seen acquisitions on reward in this supply saturated market. out of town retail parks, taking up With so many potential units available, space previously occupied by Toys inaction may well lead to years, rather R Us and the likes. Whilst there may than months, of income void. be planning hurdles to overcome, and these operators again provide a potential lifeline, not least given their typical size requirements from c15,000 sq. ft. upwards. For further information to landlord income. Nonetheless it We have also witnessed the explosion Lastly a personal hunch. Much has been please log onto fleurets.com represents one of the more realistic of street food halls in urban locations written about our shopping habits, or contact opportunities with space requirements in the UK following the success of many saying they have fundamentally often in the region of 10,000 sq. ft., the original Time Out food market changed during lockdown with the there will no doubt be many a landlord in Lisbon, Portgual and the opening acceleration towards online retailing. chasing such covenants. of three in London by Market Hall However, could the world’s largest including their largest in part of the online retailer help salvage bricks and Prior to lockdown, there was significant former BHS department store on mortar retailing in the UK? growth in the experiential leisure Oxford Street. The concept could market, with activities ranging from easily transfer to a leisure park, and Amazon Go reportedly acquired their Graeme Bunn golf, to football, to live events and why not replace a single arguably tired first high street store in Notting Hill, Managing Director virtual reality concepts providing strong branded restaurant with a host of London in March this year.