Simon Quinton Smith gives an overview as to why garden centres in the UK are a good investment.
Garden centres as an alternative investment class are coming into bloom right now. Institutional investors are waking up to the fact that there has been a seismic shift in the market in recent years. Not only do they weather the recession well, but they could be considered almost as a retail and leisure investment as more people choose to spend their leisure time at a garden centre. Many now incorporate restaurants, cafes, farm shops, gift shops and outdoor children’s play areas. Operators have been diversifying and weather proofing their income streams, thus making them more attractive to investors.
The demand for centres, both by occupiers and by investors has never been stronger. Prior to Wyevale offering their whole portfolio of 145 centres for sale in 2018, Orchard Street Investment Management, on behalf of St James’s Place Wealth Management, acquired eight garden centres in a £91 million sale and leaseback deal with Wyevale Garden Centres and Blackrock bought a £110 million garden centre portfolio from LaSalle Investment Management/Wyevale, with Wyevale as a tenant with a yield of 5.5%.
The majority of the Wyevale’s freeholds and many of the leasehold garden centres were snapped up by a range of garden centre groups and independent garden centre operators.
Here are some other reasons why garden centres should be given more attention: –
• Larger plot sizes when compared with more traditional investment properties.
• With the recent relaxation of the planning laws, there are opportunities to apply for a change of use and increase values, specifically for residential and care. We currently have a number of garden centres under offer for care home development subject to planning.
• Running garden centres profitably can be difficult, however if you have an owner who wishes to undertake a sale and leaseback, or the current tenant is running the business well, then there is no reason why you shouldn’t reap the rewards in terms of income stream.
• Garden Centre leases are usually 25-35 years and can offer long-term security
I believe that the sector is currently where student housing was some ten years ago and look where that is now with the original highly specialised operators being joined by some of the global investment players. It is too early in the season to suggest that the same phenomenon will occur but the more astute investment managers are already taking advantage of a relatively open field and will reap a good harvest.
To discuss investments with Simon Quinton Smith please call 01635 551441.