Brookfield is selling the UK holiday resort Center Parcs. This deal will test investor’s willingness to gamble on an economy that has been hit hard by inflation and interest rate increases.
According to sources familiar with the situation, the Canadian private equity group has been examining the possibility of exiting the investment over the past few months.
Brookfield’s bold decision to proceed with the sale – which would be the biggest real estate deal of this year – comes at a time when the UK is facing falling property values and rising interest rates.
Brookfieldhas hired investment bankers to sound out potential buyers, including other private equity firms.
The mergers and acquisitions market has slowed down this year due to investors’ caution over concerns about the economy and rising debt costs that some companies use to fund their deals. PE deals in Europe dropped to their lowest level in the first quarter, while IPOs worldwide fell 61 percent year-on-year over the same time period.
Brookfield and Center Parcs have declined to comment.
If the sale proceeds, Brookfield could see a significant windfall. In 2015, purchased Blackstone’s resort business for approximately £2.4bn.
Center Parcs has six holiday villages located in the UK and Ireland. They offer attractions like water parks and playgrounds. Center Parcs five UK sites, valued on the basis of their real estate value alone, were independently appraised at £4.1bn by an independent expert in April. The sale will include approximately £2bn of existing debt. This is likely to ease the deal, as raising new funding would be difficult due to market anxiety.
Professional investors have been investing in UK’staycation businesses’ like holiday parks and caravanning sites for years. Blackstone, KKR, and Onex are among the largest PE firms that have invested billions of dollars into this sector.
Consumers who are looking to save money can find cheaper alternatives to travel abroad through companies that offer an alternative.
Cushman & Wakefield, a real estate advisor, reported that the volume of hotel deals in Europe reached EUR4.3bn during the first quarter. The hotel sector was the only one to have seen a higher deal volume in 2022 than it did for the same period of time in 2019. Dealmaking across the entire real estate industry had declined.
Brookfield has made significant investments in Center Parcs, including £100mn for tech upgrades. According to Brookfield, the company has more than 2 million guests per year and 98 percent occupancy.