AREA Property Partners has acquired a 30 percent stake in the UK retail and entertainment property trust X-Leisure Fund for an estimated £65 million (€74.8 million; $106.5 million).
The purchase comes days after the New York-based firm sold a 35 percent minority interest in its management company to the direct asset management arm of National Australia Bank, nabInvest, to help fuel the growth of AREA in terms of deal flow and future capital raising.
The X-Leisure fund interest was purchased from the BT Pension Scheme and Hermes Fund Managers, which is wholly-owned by the telecoms pension fund. In 2004, the real estate arm of Hermes, Hermes Real Estate, created X-Leisure with Capital & Regional and had to take over the fund's operation in August 2009 after its property values declined 45 percent and it was forced to raise £50 million in recapitalisation equity from investors.
Since the recapitalisation X-Leisure, the unit trust's portfolio values have stablised and the trust is reported to have returned almost 46 percent in 2010, beating 58 other British real estate funds, according to Bloomberg.
A spokeswoman for Hermes confirmed the deal to PERE saying in an emailed statement: “AREA Property Partners has completed the acquisition of the BTPS and Hermes Real Estate management interests in the X-Leisure Fund and X-Leisure Limited.” Capital & Regional continues to own an 11.9 percent stake in the fund, according to Bloomberg.
Led by chief executive and former head of the UK’s Millennium Dome and Olympic ice hockey player Pierre-Yves Gerbeau, X-Leisure operates 18 retail and entertainment centres across Britain, including the indoor ski facilities Xscape Milton Keynes and Xscape Castleford. In total, X-Leisure runs more than four million-square-feet of space. The portfolio had a gross asset value of £518.8 million and a net asset value of £147.9 million as of the end of December, according to the fund’s website, down from £947.1 million at the peak of the market.
Chris Taylor, head of real estate at Hermes, told Bloomberg the sale was part of the group’s exit from the retail and entertainment sector, and part of Hermes’ strategy to reduce investments in closed-ended funds as it looks to take greater control over BT’s £4 billion real estate portfolio.
Earlier this month, AREA and nabInvest revealed the sale and acquisition of a 35 percent stake in the private equity real estate manager. At the time AREA said the deal would help it grow its debt and equity activites as well as “acquire larger distressed assets”. The equity will also be used as co-investment in existing and new AREA funds, nabInvest added in a separate statement at the time.