Heath and fitness entrepreneur Duncan Bannatyne has struck a £92milllion sale and leaseback deal on 39 of his clubs including one in Aberdeen.
The multi-millionaire Scot’s firm, Bannatyne Fitness, sold the property to London-based M&G Investments in an effort to clear debt.
Mr Bannatyne borrowed more than £180million from failed lender Anglo Irish Bank in 2004 to acquire 24 clubs from the Hilton Group. But the deal went sour when Anglo Irish was nationalised during the banking crisis as liquidators chased its borrowers to repay debts.
The health club chain, which has 60 gyms across the UK, said the deal has cleared the Anglo Irish loan and is now “virtually debt free”.
The long, 125-year leases on the properties see Bannatyne Fitness pay a lower than market rent.
M&G said the deal structured in this way to minimise “risk of the rent becoming unaffordable for the tenant”.
Mr Bannatyne, who is chairman of the Bannatyne Group, said: “This deal has been reached with one of the most successful investment businesses in the world. M&G can see the long-term value of our business and has agreed to be our landlord over a very long lease term.”
Nigel Armstrong, chief executive of Bannatyne, said: “The transaction enables the business to be virtually debt free and will greatly benefit the liquidity of the business, at the same time allowing us to continue to fully control the operation and management of all the health clubs. Coupled with the ongoing profits from the business, which have climbed this year, the business has emerged from the economic storm stronger than ever. Innovative thinking and judicious use of business assets give us the future resources to continue to provide customers with fantastic products and service which enhance their lifestyle.”
Ben Jones, M&G fund manager, said: “This is another high-quality deal that delivers exactly the sort of investment returns our many pension fund clients need.
“What makes this especially interesting is that it is an attractive and secure way to generate exposure to the leisure sector and provide very long term secure and index-linked cash flows.”
Kris McPhail of M&G Real Estate said: “This is a significant transaction in the key operating assets of an established and successful business. We have substantial funds available for inflation-linked investments and we expect to see more of these structured, low-geared rent deals done because it is an attractive way for companies with significant operational real estate to refinance.”