€20m for 20% of centre on the Green

CASH-RICH INVESTORS are to be given the opportunity to buy a 20 per cent stake in Dublin’s St Stephen’s Green shopping centre for €20 million. The investment offer is to be circulated shortly among asset managers, institutions and high net worth individuals by John Moran, MD of agent Jones Lang LaSalle.

The sale follows a decision by a unit linked fund to seek a buyer for its stake which is managed by Irish Life and Permanent as part of its 73 per cent equity holding in the shopping complex.

The move comes just before the centre is to get a major shot in the arm with the development of a cinema complex by Paul Anderson* on the centre’s roof. The 1,850 cinema seats are likely to be a huge success because of their prime location close to the most popular city restaurants and bars and within two minutes walk of the main Luas stop. The availability of some 1,600 car-parking spaces in the shopping centre will be a huge bonus as well as bringing in significantly more revenue in parking fees for the shopping centre and the College of Surgeons who share the proceeds.

The large Cineworld on Parnell Street is currently the main venue for cinema goers in the city. The launch of the new multiplex cinema will be followed by the opening of a range of restaurants and coffee shops on the third floor of the shopping centre where there are about 15 outlets.

The €20 million valuation being put on the 20 per cent shareholding going for sale suggests that the shopping centre is worth around €100 million – a figure that will be seen as realistic after a severe fall in values over the past four years. At the height of the commercial property market, the centre was worth at least €250m.

Businessman Pierce Moloney is reputed to have paid in the region of €64 million for British Land’s 27 per cent shareholding in 2003. The centre continues to produce a strong rent roll, currently at €10.5 million, even though there are about 15 pop-up shops and a number of vacant units among the 100 outlets in the centre. Whoever buys the 20 per cent stake can bank on a net return of 9.3 per cent even before the additional benefits begin to flow from the cinema project.

John Moran says that the investment opportunity comes with a solid income return in one of the best located shopping centres in Dublin with “significant asset management upside potential”.

While the centre has a good mix of successful multiple traders its main weakness has been its failure to attract big name fashion retailers because it does not have sufficiently large shops. The centre’s management are unlikely to dodge this shortcoming much longer and the sale of the 20 per cent stake may lead to the amalgamation of some shops on the ground floor and the removal of some of the 20 kiosks which give the centre a cluttered appearance. One or two of the tenants may also expect incentives to move out.

Meantime, TK Maxx is the main attraction in the centre where it pays a rent of around €600,000 for a shop of 2,322sq m (25,000sq ft). Argos (1,393sq m/15,000sq ft), Café Kylemore (1,021sq m/11,000sq ft) and Benetton (278sq m/3,000sq ft) are all paying over €400,000 a year. The other notable traders include Lifestyle which pays around €300,000 for a similar floor space to Benetton. Anchor tenant Dunnes Stores made an outright purchase of its fashion, homestore and supermarket before the centre opened in 1988.

* This article was amended on Thursday, March 29th to correct a factual error.