InvestmentsIn what's likely to be the biggest sale this year, 68 retail units with a rent roll of €10 million at The Square in Tallaght are on the market, writes Jack Fagan

Quinlan Private is to sell a major investment portfolio in The Square shopping centre in Tallaght, Co Dublin, along with an 11 per cent stake in the planned expansion of the complex.

The unique package is expected to make around €350 million when it is sold by private treaty through CB Richard Ellis. The investment covers 68 shops occupied by many of the top traders in the centre and has a rent roll of €10 million - about 51 per cent of the entire rental income from the shopping centre.

The selling agent estimates that, with the market rent of these shops now valued at €11.8 million, the sale will show a net yield of 3 per cent for new owners - even before the development potential is taken into account.

Quinlan Private was one of the original investors in The Square when it opened in 1990, buying up blocks of retail space on all three trading floors on behalf of high income earners looking for a safe investment in the property market. The investment has proven highly successful with the investors benefiting from strong rents and huge capital appreciation as well as 10 years of capital allowances before they were phased out.

Quinlan Private has continued to acquire the freeholds of additional shops over the years to capitalise on the strong trading performance of the centre and with the ultimate intention of putting the entire portfolio on the market. The timing of the planned exit coincides with preparations for a major extension of the centre due to get under way later this year. The existing shopping centre stands on seven acres and, with a further 20 acres available, there is the potential to triple it in size with a mixed-use scheme to serve what the vendors say is "the third largest population centre after Dublin city centre and Cork".

Pat Gunne, managing director of CB Richard Ellis in Ireland, is handling the sale of what he calls "a unique portfolio . . . a secure dry investment with an angle to go slightly up the risk curve to enhance overall returns. This is the perfect play for an investment in the retail sector where there is the opportunity to actively manage the portfolio and avail of a development upside through the large extensions planned in phases three and four."

Who is likely to buy the portfolio? The favourite has to be solicitor and property developer Noel Smyth who is one of the largest private investors in The Square. Even more significantly, his company, Alburn, holds the development licence to enlarge the centre over the coming years.

The other contenders may include Alanis, the company controlled by the McCormack family, who along with AIB Investment Managers are substantial owners in The Square.

Property developer Liam Carroll, with several other major developments in Tallaght, may also decide to renew his tussle with old sparring partner Noel Smyth even though he already owns more land than he could hope to develop in a lifetime.

Quinlan Private will also be hoping to interest property developer Joe O'Reilly, already the largest player in the Dublin shopping centre market with major stakes in Dundrum Town Centre, The Pavilions in Swords and the Ilac in Dublin city centre. With O'Reilly currently the lead developer in the enlargement of all three centres and heavily involved in building a new town at Adamstown in west Dublin and a large office scheme in the south docklands, he may well decide that he has enough on his plate.

And then there is property developer and investor extraordinaire Bernard McNamara who has been one of the most active figures in the Dublin property market in recent years.

CBRE will be offering the portfolio for sale in its entirety and also in five lots in the expectation that parts of it will be of interest both to pension funds and high net worth individuals. The largest lot, with 30 units and a reversionary rent of €3.7 million, is valued at €112 million; a lot of eight units and a market rent of €3.1 million is priced at €94 million; a third lot of 11 units and a market rent of €2.66 million is expected to fetch €81 million; a fourth lot of eight units with a reversionary rent of €1.74 million is valued at €52 million; and a fifth lot of 11 units with a market rent of €570,000 has a guide price of €17 million.

All the shops and a small number of storage facilities in the portfolio have an average of 18 years to run on the leases.

Though the selling agent was not in a position to give a breakdown of the individual stakes in the forthcoming extension to The Square, another source indicated that Noel Smyth's company Alburn would have the largest shareholding of 45 per cent. This would be followed by South Dublin County Council - owners of the land - with 35 per cent; Quinlan Private with 11 per cent; and other owners with 9 per cent.

Planning permission has already been granted for a development of 75,000sq m (807,293sq ft) which will include 23,232sq m (250,067sq ft) of additional retail space, 4,108sq m (44,218sq ft) of offices, 3,690sq m (39,720sq ft) of leisure facilities, 373 apartments, 1,617sq m (17,405sq ft) of multi-storey car-parking and 15,755sq m (169,585sq ft) of ancillary space.

No planning has yet been sought for the fourth phase which could well have a gross floor area of 99,000sq m (1.066 million sq ft).

With the current centre having a plot ratio of only 0.68 to one, there is also scope to enlarge it as well as upgrading it to engineer higher Zone A rents.

The present Zone A rental value of €2,421 per sq m (€225 per sq ft) is well short of the going rate of €3,764 per sq m (€350 per sq ft) in Blanchardstown Town Centre and €4,090 per sq m (€380 per sq ft) in Liffey Valley.

CBRE contends that the rents should be higher in Tallaght given that it serves a local population of over 100,000 and has a catchment of 600,000 within 20 minutes drive time.

The Quinlan Private portfolio has many of the top name tenants in Tallaght, including Debenhams, Adams, Argos, Boots, H Samuel, Clarks Shoes, Superdrug, Gleeson Butchers, Heatons Home, Shoo, Blacktie, Champion Sports, Virgin, Specsavers, 3G Mobile, Miss Moneypenny, Motion Pictures, Hallmark Cards, Best Menswear and the AIB and Bank of Ireland banklinks.

CB Richard Ellis has invited "indicative offers" by July 4th but has indicated that it reserves the right to deal in advance of that target date.