Davy fund buys majority stake in Navan Town Centre for bargain €43m

A majority stake in Navan town Centre, which was on the market in 2016 for €62 million, has just been bought for about €43 million.

However, the off-market sale, which was handled by Rod Nowlan of Bannon and has just received clearance from competition authorities, did not include a residential element valued at less than €5 million that formed part of the 2016 offering.

The stake was sold to a fund controlled by Davy at an attractive yield of about 9-9.5 per cent. This is undoubtedly a strong return for an asset of this scale in the Irish market at this time. However, the fall in value of the stake since 2016 is reflective of a softening market for provincial retail assets at a time when traditional retailing faces a significant challenge from ecommerce.

‘Stampede’

Declan Stone

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, managing director and head of retail at Colliers, recently said that there “has not been any stampede out of retail investments, though the sector is more than a little unloved at the moment”.

He pointed to some notable retail transactions recently – principally Kilkenny, Carlow and Globe retail parks (all acquired by Friends First) – but suggested that retail as a sub-sector of the overall Irish investment market had its heyday in 2016 when retail transactions accounted for some 50 per cent of a €4.4 billion market.

“In 2017 it fell to 28 per cent of a €2.28 billion market and up to the third quarter of 2018 only accounted for about 11 per cent of the total €2.53 billion spend,” says Stone.

“For me, the charge into retail in 2016 was somewhat surprising and seemed far more driven by the weight of capital than by underlying occupier demand. Put simply, retail yields tumbled – driving up capital values – but in the background there was little tenant demand to underpin this, and in fact in the intervening 24 months the occupational market has worsened.”

The 65 per cent majority stake in Navan Town Centre came on the market in September 2016 through Savills and Cushman & Wakefield. CarVal Investors had bought loans underpinning the centre during the crash.

A number of deals were reportedly agreed for the stake at a price of about €54 million, but the major international investor concerned did not proceed with a transaction.

Driving force

Commercial property developer Duignan & McCarthy was the driving force behind Navan Town Centre down the years, but it was originally developed in 1980 by Phil Monahan’s Monarch Properties. It has been extended on at least six occasions since 1995 – the last in 2009, which brought the overall retail area up to 23,225sq m (250,000sq ft).

The 65 per cent shareholding was generating a rent roll of about €4.7 million as recently as 2017.

The balance of the shares in the centre are held by Irish Life.