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Frasers Group is known for being one of the sector\u2019s most prolific investors in retail brands, but it\u2019s also quickly becoming a property giant.<\/p>\n
The group revealed this week that it had snapped up a trio of shopping centres across the UK, taking on the 600,000 sq ft Princesshay Shopping Centre in Exeter, Kent\u2019s Fremlin Walk Shopping Centre, and the Olympus Centre retail park in Gloucester\u2019s Quedgeley.<\/p>\n
The centres add to Frasers’ rapidly expanding property portfolio, which also includes Doncaster\u2019s Frenchgate shopping centre, which it bought in July.<\/p>\n
But why is the retail group targeting property \u2013 and what has it done with its previous acquisitions?<\/p>\n
Shopping centres, stores and the British high street<\/h3>\n
Frasers Group chief executive Michael Murray says the acquisitions demonstrates the group’s “commitment to investing in physical retail”.<\/p>\n
\u201cSecuring properties which serve as the primary retail destination for the community remains a top priority for us. Such acquisitions\u00a0unlock new growth opportunities\u00a0for our retail concepts, while revitalising high streets and physical shopping locations up and down the country.<\/p>\n
\u201cAt Frasers, we strive to re-invent and elevate retail for UK shoppers, bringing the very best brands, environments, and experiences to all our customers across the country,\u201d he adds.<\/p>\n
Chief financial officer Chris Wootton elaborates: \u201cThe property strategy is really about unlocking the retail requirements for the sports and premium luxury businesses \u2013 that\u2019s the core bit \u2013 and we can, in effect, underwrite the values of these freeholds by putting our fascias in them.\u201d<\/p>\n
While the Mike Ashley-controlled business chose not to disclose the price it paid for Doncaster shopping centre earlier this month, it has spent \u00a391m in its most recent financial year on six property acquisitions. The division raked in\u00a0\u00a372.7m in year to 28 April 2024.<\/p>\n
Alongside Frenchgate, recent buys include the Overgate Centre in Dundee, which it paid \u00a330m for in March, Yorkshire outlet centre Junction 32, which it paid \u00a350m for last November, and The Mall in Luton, which it bought for \u00a358m last March.<\/p>\n
It also made an offer for Sheffield\u2019s Meadowhall shopping centre earlier this year, however, the group lost out to owner British Land’s joint venture partner Norges Bank Investment Management.<\/p>\n
Frasers has certainly chosen diverse locations as it builds its property portfolio, expert JDM Retail CEO Jonathan De Mello notes, however, he points out that Ashley has “picked the best centre in those locations”.<\/p>\n
“The [locations] are diverse. Doncaster, for example, isn’t the most affluent location, Exeter is nice for sure…but what he’s been doing is finding the dominant shopping centre in that location,” says De Mello.<\/p>\n
However, retail analyst Nick Bubb is less complimentary of the group’s acquisitions.<\/p>\n
“There\u2019s clearly a big recovery taking place in the shopping centre business post-lockdown and there\u2019s money to be made from it, but the main focus is on the premier division centres like Bluewater and Meadowhall: Frasers has been playing around with downmarket, third-division centres.”<\/p>\n
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It seems Frasers\u2019 property strategy is almost as aggressive as the one it has for retail brands. One property source estimates that Frasers Group\u2019s competitive bids for centres sit an average of 10% more than other offers on the table.<\/p>\n
It\u2019s not just shopping centres that the group sees value in, with the business acquiring the former Debenhams store in Dublin in 2022 and M&S\u2019 former home, Compton House, on Church Street in Liverpool.<\/p>\n
What is it doing?<\/h3>\n
Frasers Group chief acquisition officer James France said previously that the company was \u201ccommitted to investing in sites which display huge potential\u201d.<\/p>\n
It is thought that Ashley is keen to snap up shopping centres and fill them with the group’s own brands, including Sports Direct, Flannels and its new department store concept Frasers.<\/p>\n
It rings true as the group has been quick to fill its new ‘elevated’ Sports Direct flagships with fellow Frasers brands, including USC and Evans Cycles.<\/p>\n
As Wootton explains: “The core part of [the property portfolio] is to underpin the retail business”.<\/p>\n
The group has even bagged the former Debenhams store in the Overgate centre – the biggest unit in the mall – for itself, and is opening a Frasers in the unit.<\/p>\n
Wootton says:\u00a0\u201cIn a shopping centre, for instance, there\u2019s a lot of empty space where Debenhams once were that no retailer can fill.<\/p>\n
\u201cWe\u2019re pretty much the only retailer in the UK to fill them. We\u2019ve put Frasers in, Flannels in, Sports Direct in, and through being there as the anchor tenant, we can bring in new and good retailers and keep the well-performing retailers and increase the value.”<\/p>\n
De Mello agrees: “Because [Ashley has] bought more and more brands, he can occupy more space in his own scheme,” pointing out Frasers “can actually make it happen” when it comes to reinvigorating the high street.<\/p>\n
The Sports Direct owner has put its money where its mouth is when its comes to its committment to investing in physical retail.<\/p>\n
Frasers has almost finished rebranding The Mall Luton to ‘Luton Point’ as the shopping centre launched its new website this week and is putting the final touches on its signage early next month.<\/p>\n
\u201cLuton Point reflects a new ownership with a new approach, and a move to an identity more in keeping with the centre\u2019s place within the town,\u201d Mark Stapleton of Sovereign Centros, who asset manages the scheme, said earlier this year.<\/p>\n
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Meanwhile, the group’s decision to upsize several of its brands at Junction 32 helped to drive an 18.4% rise in footfall and 2.6% rise in total sales for the shopping outlet compared to the previous year.<\/p>\n
A neat investment<\/h3>\n
JLL co-head of retail value and risk advisory Ben Smith explains that Frasers Group will have the added advantage as a landlord due to its “proximity to the consumer and occupier mindset” compared to a specialist asset manager, which will “have an advantage in terms of scale and day to day expertise in managing complex retail assets”.<\/p>\n
It appears that Frasers’ ownership has appealed to potential tenants, and has recently signed a number of new leases at Dundee\u2019s Overgate Shopping Centre.<\/span><\/p>\n Chains including S\u00f8strene Grene, Muffin Break, Castore, Mooboo Bubble Tea and Cinnabon have joined Overgate’s roster over recent months, with <\/span>Rituals, Pandora, and Lovisa among those that have opened in the centre following Frasers’ acquisition in March 2023.<\/span><\/p>\n Overgate centre manager Malcolm Angus says: We have had a busy 18 months since Frasers Group invested in the Overgate Shopping Centre, to date bringing over 12 new exciting brands to the centre.<\/p>\n “Frasers Group has also renewed leases with the brands we know our customers love, with several so far reinvesting into updating their store aesthetic and product offering.”<\/p>\n Smith points out that becoming a landlord also brings the Frasers “the added benefit of accessing competitor\u2019s trading performance, where leases allow for transparency, something that\u2019s baked into the outlet model”.<\/p>\n Part of what makes Frasers’ property strategy so interesting is it comes as many property giants are shifting their focus towards retail parks, which means shopping centre prices are more competitive.<\/p>\n “Shopping centres are starting to become more and more attractive to investors, because they represent value for money,” notes De Mello. “You can get good returns.”<\/p>\n He also believes the group has benefited from taking a longer term view to investing in property, compared to most investors who “typically have a five year time horizon”.<\/p>\n However, that’s not to say the group isn’t also looking at opportunities to sell its property assets so it can “recycle that capital back into the business to spend elsewhere”, says CFO Wootton.<\/p>\n In its most recent year, the Sports Direct owner cashed in \u00a312.1m on disposals but the year before it made a whopping \u00a3207m from 13 disposals, including 9 retail parks.<\/p>\n CEO Murray said last week: “When market conditions are favourable, we maintain the flexibility to sell these assets, capturing the value created and deploying the proceeds across the group.<\/p>\n “As we move forward, we remain vigilant in monitoring further opportunities to expand and optimise our portfolio.”<\/p>\n Frasers has not only turned itself into a retail machine, but its also quickly becoming a force to be reckoned with as it bolsters its property portfolio. Much like its retail empire, expect its eclectic property portfolio to grow in the years to come.<\/p>\n<\/div>\n![\"Frasers](\"https:\/\/www.retailgazette.co.uk\/wp-content\/uploads\/2024\/07\/02.-Sports-Direct_-Oxford-Street.jpg\")
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