Center Parcs plans £28m expansion

Center Parcs, the UK holiday resort operator, said yesterday it had secured £28m of funding to expand and upgrade its facilities.

The money will be used solely for developing its existing four holiday villages in the Lake District, Suffolk, Wiltshire and Nottinghamshire. Over the next three years, Centre Parcs plans to build new accommodation at its holiday villages, as well as convert more of its existing 800 villas into luxury suites.

Some £25m has already been earmarked to spend on this project, as well as developing new sports and leisure facilities within the villages. These include health and beauty spas to encourage visitors to spend more during their stay at the resorts, which are aimed at upmarket families.

The UK company listed on AIM in December last year, after demerging from its European counterpart. But in December 2002, it sold all its assets in a lease-back deal to Sun Capital, an investment vehicle of Hugh Osmond, the entrepreneur who once ran Pizza Express with Luke Johnson.

The £28m of funding has been put forward by Sun Capital, for which Center Parcs will pay an increased rent of 11 per cent a year. Center Parcs will not have to repay the funding itself, and is putting up £12m of its own capital in to the expansion project.

"We now have in place the funding for core business expansion over the next three years on investments that will both enrich our product and yield high returns," Martin Dalby, the chief executive of Center Parcs, said. It expects to make a return of 40 per cent on the planned investments.

However, there was no sign from the company of securing a fifth site for development. It has said it is in advanced negotiations over a site. Investors are keenly awaiting the prospect of an additional resort to boost the growth potential of the group.

So, despite news of guaranteed funding for its existing estate, shares, which have slipped about 20 per cent since listing, saw little movement throughout the day. They closed unchanged at 79.5p.