Board

2012

Business Outlook

Film fillip Cinema appeared to suffer less than most from the economic strain, with audiences boosted in the peak summer period thanks to the release of major movies like the latest in the Harry Potter franchise. Cinemas also continued to benefit from a greater variety of secondary revenue streams and the roll-out of digital and 3-D capabilities across corporate portfolios enabled operators to capture additional business. In transactional activity, Odeon Cinemas’ acquisition of five cinemas from Reel Cinemas ( UK) Ltd late in the Summer was the most notable. Hi-de-Hi days back? UK holiday park businesses held up reasonably well in 2011 as more families opted for the ‘staycation’ instead of holidaying abroad. However, operators’ secondary income from the sale of chalets and caravans remained under pressure. Consensual exits formed the basis of the limited transactional activity during the year, with investors’ eye for the key locations creating opportunities at the more marginal end. The next year could be different, however, with a likely increase in distress disposals. Sporting chance Other notable movement in the year saw the further rise of the ‘small-sided football’ format. Although the sport is very land- intensive, operators like Goals, Powerleague and Play Football continue to be able to benefit from round-the-clock usage thanks to tie-ins with schools ensuring all-day use. A tip for the future may be the new concept in indoor skiing being championed by former UK Olympic skier Chemmy Alcott. Skiplex in Chiswick uses a conveyor-belt mechanism to allow skiers of all standards to develop their techniques without the need for large areas of land employed by the snow-domes. A number of golf courses came to the market during the year, as the ongoing need for considerable capital expenditure and pressure on flexibility of membership arrangements drove some operators out of the market. As the quality of some courses continues to decline and operators cannot invest sufficient capex, we expect to see further distress sales in 2012.

On a brighter note, driving ranges are proving popular, especially as more operators enhance their offerings. In late 2011, Christie + Co brought the World of Golf centre in New Malden to the market. The centre not only includes a two-tier driving range facility, but an adventure golf course with animatronic dinosaurs, a golf superstore and a Costa Coffee franchise licensed to sell alcohol.

have been hardest hit by the recession, with a number of operators looking to evolve their offering in order to retain membership through more competitive pricing. As in 2010, the budget sector was where the greatest activity took place with around 14 operators now active in the UK market. In April, Virgin Active nearly doubled its UK portfolio with the acquisition of 55 Esporta fitness centres and racquet clubs in a deal worth around £77.5 million. The freeholds of 17 racquet clubs were subsequently sold to British Land for a total consideration of £179 million on the basis of Virgin signing 25-year leases with an initial annual rental of £13 million. In October, Total Fitness (having been acquired by management and Barclays Ventures via a pre-pack administration a year earlier) went into liquidation. Having closed a number of clubs throughout the year, incumbent management was endeavouring to renegotiate lease terms with landlords across the portfolio as Business Outlook went to press. Elsewhere, Fitness First, developed its own take on the budget sector with the introduction of its “Klick” brand, whilst Bannatynes brought lower-end clubs to the market, such as one in Cheltenham which was acquired by Fitness4Less. Significantly, some operators chose to maintain their portfolios in the hope that values would return to the marketplace – although there is little indication of a return to historic high values of a few years ago. With activity quite slow, those health and fitness clubs that did come to market were largely from the individual owner-operator end. During the year we sold a number of such clubs including the Axis in Derby and Eden in Scarborough to the burgeoning operator Eze Fitness and the GL-14 portfolio to Bannatyne Fitness.

Other sectors Not bowling along

The bowling sector struggled in 2011 as it continued to suffer from a lack of variation in its offering. Consolidation continued in the sector as viable opportunities were hampered by the lack of suitably large floor area – investors seeing greater potential for success in utilising areas for other entertainment and leisure forms such as cinema.

34