Investors pull out of two shopping centre purchases

Navan Town Centre and Mullingar’s Fairgreen lose out on sales to US companies

Navan Town Centre: Davidson Kempner was expected to pay about €59 million for a majority stake.

Navan Town Centre: Davidson Kempner was expected to pay about €59 million for a majority stake.

 

Two large American investment companies have decided against proceeding with the planned purchase of shopping centres in Navan and Mullingar.

Davidson Kempner had been expected to pay some €59 million for a majority stake in Navan Town Centre, while Oaktree was in advanced discussions on the purchase of the Fairgreen retail complex in Mullingar, which had been expected to make about €12 million.

CarVal Investors bought the loans underpinning both shopping centres shortly after the property market crashed.

Both centres were developed by Duignan & McCarthy and continued to trade strongly through the recession because of the impressive line-up of tenants and their easy accessibility.

Duignan & McCarthy’s 66 per cent interest in the Navan centre (the remaining shareholding is held by Irish Life) generates an operating income of €4.7 million. The Mullingar centre produces a net rental income of €920,000. Retail experts are confident that alternative purchasers will shortly emerge.

Parties close to both transactions have nevertheles been surprised by the latest development, which comes more than two months after the Government unexpectedly introduced a 20 per cent withholding tax on property investors.

The collapse of the sales could also have been triggered by concern among the American investment funds that their original exit strategies may no longer be viable. Market uncertainties have even led to speculation that the key overseas players in the shopping centre market might look at a future exit through the launch of a retail REIT or a listed fund.

The scale of ownerships required for such a launch would probably be of the order of €1 billion. Most, if not all, the main property holders would fall well short of that milestone.

Davidson Kempner has been one of the main overseas investment groups in the rapidly changing Irish property market. In one deal, it paid €170 million for a portfolio of retail parks, including Nutgrove in Rathfarnham, Letterkenny in Co Donegal, Tullamore in Co Offaly and Deerpark in Killarney.

Oaktree Capital, the world’s largest distressed debt investor, has also built up a substantial Irish portfolio. Two years ago it joined Nama and construction firm Bennet Group in a €450 million venture to develop 42,500sq m (45,500sq ft) of offices and 158 apartments on a south docklands plot.