Overseas investors are showing renewed interest in Irish market, writes JACK FAGAN 

A GERMAN bank looks set to complete the purchase of the Tommy Hilfiger store in Dublin’s Grafton Street, marking a return by overseas buyers into the Irish commercial property market.

It will be the first significant acquisition here by a foreign fund since the German group Deka bought the Mahon shopping centre in Cork for over €250 million about eight years ago.

Overseas buyers have stayed out of the Dublin market for over a decade because of the perception that properties were overvalued. However, with high street values now down by around 50 per cent in Grafton Street, Henry Street and Mary Street and some peripheral properties slipping by even greater margins, funds based in London are showing renewed interest in the Irish market.

A number of small Irish pension funds are also studying a range of investment properties which have been repriced and offered for sale in recent weeks.

Sean O’Neill of DTZ Sherry FitzGerald says the main focus of attention is on high street retail investments with long leases and a secure income. The alternative investment opportunities were bank interest rates of 1 or 2 per cent or the stock market which was still quite volatile.

The German bank is expected to pay in the region of €23 million for the Tommy Hilfiger store, an investment which will show a return of around 6.7 per cent. When it was first offered for sale through agent CB Richard Ellis last November, it had a price tag of about €30 million – reflecting a yield of 5.25 per cent.

With the banking crisis rolling on, sentiment in the investment market has worsened since then and one of the property portfolios just launched is offering buyers much enhanced returns.

Royal Liver Assurance is quoting yields of between 6 and 6.8 per cent on three retail investments on Grafton Street and three more on Henry Street.

The most valuable property going for sale includes the landmark McDonald’s fast food outlet and the adjoining Foot Locker store at 9/11 Grafton Street. The block has a guide price of €24.5 million, a figure that would show a net yield of 6.2 per cent.

Though the food chain has a break option in its lease in 2011, there is considerable confidence that it will sign a new lease given that it was McDonald’s first Irish outlet and is still trading strongly, staying open 24 hours a day. It would be no surprise if McDonald’s moves to take over the Foot Locker space when that lease runs out at the end of this year.

Funds studying this investment opportunity are also likely to look at the adjoining retail building occupied by Office shoe shop which has 19 years to run on the lease and is available at €15 million.

Equally interesting are three retail investments on Henry Street which are priced at between €4.5 million and €6.1 million. Two of them are let to O2 while the third is occupied by Vodafone.

DTZ is also marketing the extensive Café en Seine building on Dawson Street which is expected to sell for around €8.9 million.

The tenant, Capital Bars, may well be among the bidders for what is an exceptionally fine building.