US / UK: US-based real estate investment trust [REIT] Sun Communities has announced that it has agreed to purchase UK holiday park operator Park Holidays UK for approximately £950 million [$1.3 billion].
The transaction is expected to be completed in 2022, and Park Holidays’ existing operating team, led by CEO Jeff Sills, will continue to run day-to-day operations under Sun’s ownership. The purchase price for the transaction, which is expected to close in the first quarter of 2022, is almost treble the £362 million that Park Holidays’ current owner Intermediate Capital Group paid out for the company in 2016.
According to Sky News, Sun Communities fended off competition from pension fund the Universities Superannuation Scheme and Starwood Capital to complete the deal.
As the second largest owner and operator of holiday parks in the UK, Park Holidays primarily rents out sites for owner-occupied holiday homes on annual contracts, although it also sells holiday homes to new customers. The majority of its 40 owned and operated sites, and two managed sites, are located in seaside destinations in the south of England, within relatively short driving distance from London.
The Park Holidays UK acquisition will represent about seven per cent of Sun’s properties and eight per cent of the company’s total pro forma real estate asset value.
Gary A. Shiffman, chairman and CEO of Sun Communities, said: “We are incredibly excited to expand Sun’s footprint into the UK by acquiring Park Holidays, which allows us to leverage our land lease community expertise in a growing market. This transaction provides Sun with immediate scale in the UK as well as a platform for future growth in a fragmented landscape.
“We have completed significant strategy and research work in the UK with advisors prior to this opportunity, and feel confident that its long-term macroeconomic stability and fundamentals make the UK a very favorable destination in which to expand the Sun Communities platform internationally. Park Holidays has many parallels with Sun, such as its strong portfolio, its focus on growth, and a management approach that is consistent with ours.
“Under the leadership of Jeff Sills and his highly experienced senior management team, who have led the company since 2006, Park Holidays has created a strong brand given the quality of its assets and stellar customer service. Its management team has a proven track record of acquiring and expanding properties, efficiently integrating them into the platform, and creating significant value in a short period of time,” he added.
John B. McLaren, president and COO of Sun Communities, said: “As we performed our diligence and underwriting processes, we were thrilled to discover how similar our MH and RV business models are to Park Holidays’ operations and expect to apply our deep expertise to this new market and thereby accelerate our growth. Overall, the holiday park sector in the UK is an overwhelmingly domestic market and very similar to both the MH and RV industries in the US.
“There are several compelling tailwinds that make us excited to enter the UK market as it has demonstrated consistent, steady growth through economic cycles and is currently benefiting from a rising interest in premium outdoor vacations and second home purchases as well as a number of high barriers to entry given limited land availability and zoning restrictions. Over time, we intend to use this platform to continue to scale in the UK market, just as we have successfully done in the US,” he added.
Park Holidays CEO Jeff Sills said: “Joining Sun is an exciting new chapter for Park Holidays as we seek to continue to execute on a well-established and proven strategy to drive organic and inorganic growth. Our companies have a lot in common as we both strive to achieve the best experience for our customers and colleagues, and we are excited by the opportunity to work and collaborate with the Sun team.
“Our business has delivered strong and consistent growth through economic cycles, as we have built a unique portfolio of well-located assets and a sustainable and diversified business model with industry leading operating metrics. By joining Sun, we plan to continue to consolidate a fragmented industry and provide the Park Holidays experience to an expanding customer base,” he added.
The regular income from year-long contracts, as well as the growth in popularity of domestic staycations due to Brexit and the pandemic, has made the UK holiday park a highly attractive proposition to both private equity and institutional investors – an industry that has demonstrated its resilience and is currently valued at an estimated £5 billion.
In a highly fragmented holiday parks market which is anticipated to see compounded annual growth of approximately six per cent from 2021 to 2025, industry sources say that platforms with ten or more properties account for only around seven per cent of total properties. At the same time, research published by New Street Consulting Group suggests that revenue at the top 25 holiday parks in the UK has risen by 65 per cent in the last five years, making the segment ripe for further consolidation.
In recent times, the likes of Blackstone, PAI Partners, CVC Capital Partners and KKR have entered the holiday park sector by purchasing Bourne Leisure, European Camping Group, Away Resorts and Roompot respectively, while Newcastle-based holiday park operator Parkdean Resorts is rumoured to have been put up for sale for £1.5 billion.
Meanwhile, companies such as Awaze [Quality Cottages, Quality Unearthed, Amberley House, Portscatho Holidays, Bornholmtours] and Sykes Holiday Cottages [Best of Suffolk, Abersoch Quality Homes] have been busy consolidating their own businesses with acquisitions, and Away Resort and Aria Resorts announced a merger in August to form a new £600 million “staycation powerhouse”.