Leisure property: High risk or recession proof? (EUR)

X-Leisure, the UK's largest leisure property owner launched today a report entitled Making a Case for Leisure at Jones Lang LaSalle to a busy room of property fund managers, investors and advisors. PY Gerbeau, CEO of X-Leisure, presented the report, which looks at the Family Leisure sector* and highlighted that property investors typically overlook and misunderstand this robust asset class which is characterised by strong trading tenants with long leases, low voids, minimum uplifts and affordable rents.

Changing life styles and family spending patterns have made Family Leisure a non-discretionary spend, even in a recession, however it continues to be an under recognised sector . PY Gerbeau said: "The Family leisure sector is at the core of consumer's outgoings and contrary to popular belief consumer's Family Leisure spend actually increases during times of austerity. It seems to me that investors shy away from the sector through the misconception of a reliance on discretionary spend and a fear of the unknown. Today we aim to unveil the trading strength of our tenant partners and the inherent investment attributes that the leisure property sector offers."

Despite a difficult trading backdrop in recent years, the majority of well positioned Family Leisure operators have demonstrated trade resilience and even growth as consumers continue to enjoy affordable leisure experiences, a phenomena X-Leisure term "Lipstick Leisure".

The cinema is the anchor tenant of leisure parks and can account for up to 90% of income. This sector is solid today and looks strong for the future with consumers increasing not cutting back on their cinema spend. 2009 was a record breaking year with box office revenues in excess of £1billion for the first time in history. .2010 is set to exceed this helped by good product including the launch of Harry Potter last weekend, the highest grossing opening weekend in history. Rising admissions coupled with increasing ticket prices for 3D films maintain the relative affordability of rental levels and minimum fixed uplifts which make cinemas a low risk, secure and stable anchor tenant.

The casual dining and fast food sector is the second most important sub sector within leisure parks, accounting for up to 50% of income. This sector has also shown resilience and trading has remained healthy and is set to grow by a further 20% by 2014. Restaurant leases are commonly for a minimum of 15 years with rents ranging from £20 to £30 per sq ft, meaning rents are affordable but also provide room for future rental growth.

Tim Vallance, Head of Out of Town Retail and Leisure at Jones Lang LaSalle said: "Property assets leased to Family Leisure operators are economically defensive and recession proof with inherent investment merits. Leisure tenants trading well pose little risk to landlords, cementing their rental stream and minimising their exposure to vacant properties; benefiting from longer leases additionally allows landlords to take advantage of the longevity of rental streams. The strength of the leisure sector is further supported by the increase in corporate activity, especially in the casual dining sector, where investors are willing to pay a premium to buy strong performing brands."

Source: JLL

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