THE sale of Butlin’s holiday centre in Minehead took a major step forward this week when it was revealed a ground-rent deal had been concluded with the UK’s largest by assets private pension scheme.

Universities Superannuation Scheme (USS).

It gives USS ownership of the land on which Butlins operates, but not the premises nor the business, which were said to be unaffected by the transaction.

USS is believed to have paid about £300 million for ‘the underlying real estate interest’ of all three Butlin’s centres, the others being in Skegness and Bognor Regis.

The Free Press was told this week that ‘a sale process for the operating company remains ongoing’, although no timescale could be given for it.

USS bought the sites from American private equity firm Blackstone, which acquired a controlling interest in Butlin’s owner Bourne Leisure Group last year.

Blackstone was said to have decided late last year that Butlin’s was not part of its core growth plans and instructed bankers Rothschild to conduct an auction to offload the firm for around £700 million.

Several parties were rumoured to be interested, including Asda supermarket owners TDR Capital, Punch Tavern owners Fortress Investment Group, private investment firms Queensgate and Bain Capital, and private equity manager Epiris (CORRECT).

However, several months later, a deal had still not been reached with any bidder.

USS negotiated the ground acquisition from Blackstone via its in-house private markets team at USS Investment Management (USSIM) as a long-term investment for the pensions scheme.

USSIM private markets group chief Mike Powell said: “Butlin’s is a much-loved British institution and this acquisition represents a significant investment in its future while providing the long-term cashflows that USS needs to pay the pensions promised to our members.”

Mr Powell said ground rent-type agreements were increasingly common in the hospitality and leisure industry and it would have ‘no impact on Butlin’s day-to-day operations or ownership’.

The transaction fitted USSIM’s strategy of investing in long-dated inflation and nominal income streams which were aligned with USS’s long-term liabilities.

USSIM has to date built a circa £3 billion portfolio of private real estate and credit assets to provide USS with important ‘hedging qualities’ while bringing innovative long-term financing solutions to a range of counterparties and market participants.

USSIM has ambitions to substantially grow the portfolio over time.

USS was established in 1974 as the principal pension scheme for universities and other higher education institutions in the UK and has more than 470,000 members across more than 340 institutions with total fund assets of around £82 billion.

The Free Press broke news of the deal to Minehead Mayor Cllr Andrew Kingston-James, who said the big question people wanted to know was if Butlin’s was going to remain in the town.

Cllr Kingston-James said: “From the town’s point of view I would certainly hope they get a really good long-term lease, because it is part of the town.

“Butlin’s is a very emotive subject. It is the biggest employer and without Butlin’s what would we have?”