Private equity and institutional investors dominated the forecourt property market in 2015, taking stakes in four of the top five independent retailers, according to Barber Wadlow’s latest market update.
The influx of private equity investment into UK fuel retailing businesses collectively values the companies at more than £3bn, the report said. Investors have been attracted by the businesses’ strong cashflows, which are underpinned by real estate.
Barber Wadlow’s forecourt property value indices posted a 14% increase in 2015, values having risen by 49% since the bottom of the market in 2011.
In recent years, investor focus in the roadside sector was mainly concentrated on motorway services because forecourt businesses lacked scale. But now major investors, such as TDR Capital, Lone Star and Clayton Dubilier & Rice, have piled into the sector.
According to the report, 1,375 sites transacted in the last 12 months, a 56% increase on 2014, and 88% of these sites have been part of a major private equity investor transaction. The most recent purchase was Lone Star’s acquisition of MRH, the UK’s third-largest forecourt retailer behind Tesco and Shell, and the largest independent operator, with 448 sites.
“Values have been driven by all segments of the market, with big and small retailers actively seeking to grow their businesses,” said Adam Wadlow, Barber Wadlow director.
Wadlow said the sector had been hit by a dearth of supply, particularly for single sites, with some sites that exchanged in 2015 receiving more than 25 bids.
The report also revealed a sea change in the major players in the market, with only one oil company, Shell, in the top five UK forecourt retailers.
Shell retained its top spot, although its network reduced by 23% following the sale of 185 sites, while Esso dropped from third position in 2014 to 11th after the disposal of 200 sites.
MRH increased the size of its network by 18%, rising to third position; MFG increased by 30%, taking it to fourth and Euro Garages increased by 90%, cementing its fifth place.
“The beneficiaries of these divestment programmes have been the major independent retailers, supported by their new private equity investors, who have seen their networks substantially increase in size,” said Wadlow.
This article was written by Daniele Palumbo and published on PropertyWeek.com on 31st March, 2016.
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