Hi-de-Hi finance: USS buys Butlin’s sites for £300 million

UK higher education’s largest pension fund has invested in the Butlin’s holiday resorts chain as it seeks to shore up its finances post-pandemic. 

The Universities Superannuation Scheme has signed a ground-rent deal worth £300 million with the Bourne Leisure Group to acquire the real estate assets of the brand’s three sites in Skegness, Minehead and Bognor Regis.  

USS – whose joint negotiating committee recently pushed through cuts to members' post-retirement benefits – said that the deal will provide the cashflows needed to pay pensions in the future but it will have no involvement in the day-to-day running of Butlin’s operations. A statement said that this type of agreement “is increasingly common in the hospitality and leisure industry”.

“We are very pleased to conclude this acquisition. Butlin’s is a much-loved British institution and this acquisition represents a significant investment in its future whilst providing the long-term cashflows that USS needs to pay the pensions promised to our members,” said Mike Powell, head of the private markets group at USS’ in-house private markets team USS Investment Management (USSIM).

USS is the UK’s largest private pension scheme by way of assets and also owns stakes in private companies such as Thames Water and Heathrow Airport. It has built a portfolio worth about £3 billion and is aiming to grow the assets further over time. 

At the scheme’s last valuation, held at the height of the pandemic in March 2020, managers said that the scale of the fund’s deficit – estimated to run into billions of pounds – necessitated changes including an inflation cap and a reduction in the defined benefits aspect of the scheme. Members are likely to be worse off in retirement as a result, with one recent study estimating that staff under the age of 40 face losing between £100,000 and £200,000 each. 

Critics have pushed for a new valuation to be held sooner rather than later after indicators showed a substantial improvement in the value of the scheme as economies opened up again after Covid restrictions ended.

The Butlin's deal comes as Bourne Leisure’s owner – private equity giant Blackstone – tries to offload the brand’s operating assets for about £600 million, with talks understood to be continuing with at least one potential buyer, according to Sky News.

Britain’s once much-maligned holiday camps have undergone a recent revival after families were forced to take breaks at home due to the pandemic.

tom.williams@timeshighereducation.com