While physical or bricks-and-mortar retail continues to be challenged by both the growth of online shopping and the threat posed by Covid-19, the area of essential retail is emerging as a popular defensive play for those looking for a safe return on their money.
The growing appetite of investors for the grocery sector in particular was firmly evidenced in the recent sales by agent TWM of the Tesco supermarket in Roscrea and Shannon's Skycourt Shopping Centre for €7.8 million and €6 million respectively. The two sales processes, which were completed in recent weeks, saw strong interest from a range of prospective purchasers.
Built in 2011, the Tesco supermarket in Roscrea comprises a modern detached retail building with supermarket at ground-floor level and car parking at lower ground floor. It extends to about 4,333sq m (46,640 sq ft) together with 224 car spaces.
The property is let to Tesco Ireland on a 35-year full repairing and insuring (FRI) lease from July 1st, 2011. There is a tenant break option after 15 years which is in 2026. The annual passing rent is €950,000 per annum. The sale price of €7.8 million will provide the purchaser, a private investor, with an initial net return of 11 per cent. The lease to Tesco provides for an uplift in the rent next year on a CPI mechanism whereby the accumulated CPI uplift over the first 10 years of the lease is applied to the rent.
The Skycourt Shopping Centre was acquired in an off-market transaction by a Munster-based property investment and development firm.
In operation since 2004, the scheme is anchored by Dunnes Stores and Iceland with more than 90 mall units together with a 240-space surface car park and a 440-space, five-storey car park.
While the entire scheme extends to 24,148sq m (259,930sq ft), the sale itself comprised 11,467sq m (123,429sq ft) distributed across 91 units, including a six-screen cinema, Insomnia Coffee Shop, Ulster Bank and AIB together with a new food offering in Hook & Ladder chain.
The units included in the sale collectively generated a headline rent of more than €1.3 million per annum and had a weighted average unexpired lease term (Wault) of five years to lease end/break options. Some 38 per cent of the portfolio’s rental income is derived from five top tenants which include Iceland, Dealz, Unicare Pharmacy and Holland & Barrett.
The remaining 12,681sq m (136,501sq ft) not included in the sale comprises a mix of primarily owner-occupied retail units (Dunnes Stores, Supermacs, part of an Easons unit, Lidl, Shannon Knights night club), a Texaco service station, an oratory, and an office block.