Cosgrave Group pays €120m for UK retail investment

OverseasProperty: One of Ireland's leading property developers has acquired a top retail complex in Birmingham at an initial yield of 5.55 per cent, writes Jack Fagan.

The Cosgrave Group, one of Ireland's leading property developers, has made its first significant foray into the UK property market, buying two large blocks of retail investments in the centre of Birmingham.

The company paid £80 million (€120 million) for Caxtongate 1 and 2 in an off-market deal that will show an initial net yield of 5.55 per cent.

The shopping complex is located in one of the busiest areas of the city, fronting right on to the junction of Corporation Street, Cannon Street and New Street.

It is also directly opposite New Street train station and close to the hugely successful Bullring Shopping Centre which has a shopping area of 110,000sq m (almost 1.2 million sq ft).

Fintan Tierney of DTZ Sherry FitzGerald, who advised the Cosgrave Group on the deal, said yesterday that more than 80 per cent of the retail tenants are multiples and include Monsoon, H&M, Muji, Jane Norman, Urban Outfitters, TM Lewin, Ted Baker, Jigsaw, JD Sports and Morgan.

Caxtongate's strong appeal stems from its superb pitch in the city centre and also from its huge reputation as a fashion location. For top fashion houses, there are also the advantages of lower service charges because all the shops open directly on to the streets and can set their own trading hours.

Caxtongate 1 and 2 were developed by one of the UK's largest property companies, Land Securities, which opened the first section in 1998 and the remaining complex four years later. All the shops are located behind the original Victorian façades. The upper floors are occupied by Orange Retail Ltd.

The two blocks occupy a site of one acre and are currently producing a rent roll of around £4.5 million (€6.5 million). A number of rent reviews are either ongoing or are due to commence shortly.

Paul McGrath of the Cosgrave Group said Caxtongate was "an ideal acquisition" for the group because of its superb location and strong tenant mix in the UK's second largest city. Birmingham has more than 2.3 million people living within 20kms of the city centre.

Cosgraves is understood to have been on the lookout for a high profile, high yielding investment in the UK for some time and swooped quickly when Caxtongate became available. Although the Cosgrave brothers have spent most of the past two decades building thousands of houses and apartments in the greater Dublin area, they have also had very significant success in the commercial property market at home.

Their largest retail development to date, Westgate in Blanchardstown Town Centre, has 16,722sq m (180,000sq ft) of retail warehousing with Next as the anchor tenant and 5,574sq m (60,000sq ft) of offices and 2,787sq m (30,000sq ft) of local shpping. The complex is understood to be producing around €6 million in rents.

The Cosgrave Group also developed one of the largest office schemes in the city, the landmark George's Quay opposite the Custom House, which has more than 27,870sq m (300,000sq ft) and a rent roll of €13 million. The complex has a current value of around €250 million, according to an independent valuer.

Cosgraves has also had considerable success with a speculative office scheme beside its Clearwater Cove apartments overlooking Dún Laoghaire Harbour. The 9,290sq m (100,000sq ft) of offices in West Pier are producing a rent roll of €2 million annually.

The company also retained ownership of the 150-bedroom Radisson St Helen's Hotel at Booterstown and is currently developing retail warehousing, offices and light industrial units on part of a 50-acre landholding at Santry which it bought from the IDA. Its housebuilding programme also continues unabated.