A fall-off in demand for leisure property has led to yields moving out to more than 8%.
Capital & Regional’s X-Leisure Fund, which in May put its 185,000 sq ft Fiveways scheme in Birmingham up for sale at £41.9m – a 7% yield – is now attracting bids at £35.5m – an 8.25% yield.
Fiveways: 185,000 sq ft Birmingham park is now attracting bids at £35.5m
Derwent London is also having to entertain lower offers on its Rotunda scheme in
It put the 170,000 sq ft property up for sale before the summer for £48.25m – reflecting a 6.5% yield – but is now considering offers at £42m – an initial yield of 7.5%.
Andrew McGregor, head of leisure at Savills, said: “Investment volumes in the leisure sector are down significantly. This time last year transactions totalled £800m. This year, no more than £50m has been transacted.
“Even when demand for leisure schemes was at its peak, there was only a small pot of investors. Now, specialist leisure funds such as Legal & General and X-Leisure are out of the market altogether, and debt-backed buyers are being undermined by banks taking far too dim a view
on the sector.”
Adam Coffer, managing director of investor EPF Group, which is targeting leisure assets, added: “There are still some purchasers for this type of kit, but we are all appraising such deals on the assumption of no rental uplift, and purely on asset management plays and potential downward yield shifts over the next three years. Vendors have to accept that they must move their expectations out to attract acquisitive players.”
King Sturge is advising X-Leisure; CB Richard Ellis is acting for Derwent London.
