Property Portfolio could be Most Valuable Asset in BHS Sale

Posted on 26 January, 2015 by Kirsten Kennedy

As international investment in the UK continues to grow, many retail groups are seizing upon the opportunity to offload loss making brands as a means of improving the overall performance of their assets. This is the case for the Arcadia group, which has this week announced that it will sell its BHS retail chain after boss Sir Philip Green received “several approaches” from interested potential buyers over the past few months.

Smiling woman doing shopping and texting on the way

Although BHS posted cash losses of £21 million during its last financial year, the fact that annual sales takings amount to over £600 million makes the brand a highly attractive prospect. Adding to its potential is the fact that it is debt free – a relatively unusual position for a high street retailer in the current climate and one which industry analysts believe will see numerous bidders submitting their interest.

The department store chain has been part of the Arcadia portfolio since 2000, when Sir Philip paid £200 million for its acquisition. However, recent hints from the conglomerate indicate that the founder and chairman now wishes to focus more upon the other brands controlled by Arcadia: Topshop, Wallis and Dorothy Perkins.

An Arcadia spokesperson said; “We have had several approaches on BHS over the past few months.

“It is now the company’s plan to explore whether any of these can be brought to a conclusion.”

At present, the identities of those parties interested in acquiring BHS remain a closely guarded secret, although it is common knowledge that South African tycoon Christo Wiese approached Sir Philip regarding the chain in the past 12 months. Investment firms Apollo and Hilco, which famously rescued and revived the ailing HMV entertainment brand, have also been rumoured to have shown an interest during the same timeframe.

However, property and retail experts have also hypothesised that a sale could lead to the break-up of BHS altogether, as leading department store brands could battle for control of its prime high street units including the flagship Oxford Street store. Meanwhile, as 150 of the chain’s 180 UK stores have permissions in place to sell food, they believe leading grocery retailers including Tesco and Asda may also wish to pick up a percentage share of the property portfolio.

Head of retail consultancy at Harper Dennis Hobbs property agent, Jonathan de Mello, believes that further interest will come from international department store chains yet to gain a foothold in the UK.

He says; “BHS’ property portfolio could be the most valuable part of the business given Sir Philip owns the freehold on a number of his stores.

“Most of the stores are large and very prime units that could either be sold to international retailers and department stores in their own right, or broken up into smaller, valuable units where a potential buyer could potentially build a small shopping area in a prime space.

“This would only work in BHS stores in key/valuable centres – particularly in the London area, where retailer demand for prime space outweighs current supply of such space.”

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