Frasers Group is well-known for being a significant investor in retail brands, but it is now also making a mark as a property powerhouse.
The business, controlled by Mike Ashley, is currently negotiating to acquire the entire Princesshay Shopping Centre in Exeter after Nuveen, a US-based asset manager, put its 50% stake up for sale recently.
If the deal goes through, it would add to Frasers’ growing property portfolio, which already includes the Frenchgate shopping centre in Doncaster, acquired at the beginning of the current month.
So, why is the retail group venturing into property investments, and what have they done with their previous purchases?
Focus on Shopping Centers and Expanding Retail Presence
CEO Michael Murray mentioned that acquiring the 770,000sq ft Doncaster mall highlights the group’s dedication to investing in physical stores.
Chief Financial Officer Chris Wootton explained that the property strategy involves meeting the retail needs of sports and luxury brands, ensuring the freeholds’ value by incorporating their brands into them.
Although the exact price paid for the Doncaster shopping center was not disclosed, Frasers Group has spent £91 million in the last financial year on six property acquisitions, garnering £72.7 million in revenue by April 28, 2024.
Aside from Frenchgate, recent acquisitions include the Overgate Centre in Dundee, Yorkshire’s Junction 32 outlet center, and The Mall in Luton, among others.
While Frasers has chosen diverse locations for its property holdings, it has focused on dominant shopping centers in these areas, as pointed out by expert Jonathan De Mello.
However, retail analyst Nick Bubb has criticized the group for acquiring less premier shopping centers compared to top-tier locations like Bluewater and Meadowhall.
It seems that Frasers Group’s aggressive property strategy is on par with its retail pursuits, with their bids reportedly exceeding other offers by around 10% on average.
In addition to shopping centers, the group has invested in former Debenhams and M&S store locations, aiming to populate these spaces with their brands such as Sports Direct and Flannels.
Future Plans and Reinventing Retail Spaces
Chief Acquisition Officer James France previously stated the company’s commitment to investing in sites with significant potential, intending to house their brands like Sports Direct and Frasers in these locations.
Frasers has been quick to integrate its various brands into their new flagship stores to create a comprehensive shopping experience.
By filling empty spaces previously occupied by stores like Debenhams, Frasers hopes to attract new retailers and enhance the value of the shopping centers by acting as an anchor tenant.
The group’s move to revamp The Mall Luton to ‘Luton Point’ showcases their commitment to rebranding and elevating the retail experience.
Benefiting from Property Investments and Market Dynamics
Frasers Group’s ownership approach offers advantages due to their proximity to consumers and occupants compared to specialist asset managers, as noted by JLL’s Ben Smith.
The group’s properties have attracted potential tenants, and there is considerable interest from new retailers in these spaces, especially at the Overgate Centre in Dundee.
By investing in shopping centers while many property giants shift focus to retail parks, Frasers Group capitalizes on attractive pricing and long-term investment prospects.
The group also considers selling some property assets to reinvest capital back into the business strategically, maintaining flexibility in capital deployment.
Frasers Group’s expansion into the property market parallels its success in the retail sector, signaling a robust growth trajectory for its diverse property portfolio in the future.
Image Source: Postmodern Studio / Shutterstock