US investor Davidson Kempner puts retail park portfolio on the market for €67.5m

Sale of schemes in Letterkenny, Tullamore and Killarney offers 8.72% net initial yield

US investment group Davidson Kempner will be hoping to take advantage of the current investor appetite for retail parks by bringing three of the country's best-known regional schemes to the market.

The “Cobalt Collection”, as it is known, comprises Letterkenny Retail Park in Donegal, Tullamore Retail Park in Co Offaly, and Deerpark Retail Park in Killarney, Co Kerry. The portfolio is being offered for sale by agent CBRE at a guide price of €67.5 million, which equates to a net initial yield of 8.72 per cent. The assets will also be available to purchase in individual lots.

The entire collection is producing a stable rent roll of €6,470,000 per annum, with an overall weighted average unexpired lease term (WAULT) of eight years. The tenant mix comprises both national and international brands with anchor tenants that include Woodies DIY, TK Maxx, Homebase and M&S.

Letterkenny Retail Park

Letterkenny Retail Park is the most prominent retail park in the northwest, extending to 36,606sq m (394,024sq ft) on an 11-hectare (27-acre) site. The scheme was constructed in four phases commencing in 2007 and now comprises 36 retail warehouse units. There is also a standalone McDonald’s drive-through restaurant and a supermarket occupied by Lidl (excluded from the sale). The development is 98 per cent occupied with a line-up that includes Dunnes Stores (excluded from the sale), H&M, Homestore and More, TK Maxx, Next, Smyths Toys, M&S and Boots. The retail park produces a net operating income of approximately €3.5 million per annum, with a WAULT to expiry of 7.43 years.

Tullamore Retail Park

Tullamore Retail Park is situated 2km from the town centre, on a nearly 4-hectare (nine-acre) site with two access points on to the R420. The scheme comprises 16,000sq m (170,000sq ft) distributed across nine retail warehouse units and a standalone drive-through restaurant, which is currently occupied by Burger King. The scheme trades exceptionally well and boasts a consistent 100 per cent occupancy.

The park is anchored by Woodies DIY, which occupies approximately 4,900sq m (53,000sq ft), while the wider tenant mix includes Sports Direct, Homesavers, Argos and DID Electrical. The park adjoins a Tesco Extra and a Tesco petrol station (which are not included in the sale). The retail park is producing a net operating income of approximately €1.68 million per annum and has a WAULT of close to 6.78 years to break option and 10.13 years to expiry.

Deerpark Retail Park

Developed in 2006, Deerpark Retail Park occupies a pivotal location on the western side of Killarney town centre. The scheme is anchored by Marks & Spencer and EZ Living and comprises a total of 13 retail units extending to 11,342sq m (122,090sq ft), alongside ample surface customer car spaces.

Other tenants at the scheme include New Look, Argos, Boots and Costa Coffee. The total net operating income is approximately €1.3 million per annum. The WAULT to expiry is 7.58 years.

Davidson Kempner assumed ownership of the three properties in the Cobalt Collection in 2015 as part of its €170 million acquisition from the Bank of Ireland of the "National Portfolio", a collection of five retail parks that also included Nutgrove Retail Park in Rathfarnham, Co Dublin, and Sligo Retail Park in Co Sligo.

The proposed disposal of the Cobalt portfolio comes just five months on from the US fund's sale for €65 million of Nutgrove Retail Park to the Munich-based investor AM Alpha..

It also follows on from the sale for €78 million last September by New York-headquartered Marathon Asset Management of the "Parks Collection", a portfolio comprising Belgard Retail Park in Tallaght, Dublin 24; the M1 Retail Park in Drogheda, Co Louth; and Poppyfield Retail Park in Clonmel, Co Tipperary. In that case, developer Pat Crean's Marlet Property Group is understood to have seen off bids from a range of parties including: Lone Star subsidiary Hudson Advisors; French asset management company Corum; UK private equity fund Kildare Partners; and Simon Kelly's RQTwo. A joint venture involving developer Eamonn Duignan's Lexeme Properties and the UK-based Kinetik Group is also understood to have vied for the portfolio.

Commenting on the sale of the Cobalt Collection, Fiona Kennedy, director at CBRE’s capital markets division, said: “From an occupational perspective, retail parks have proven themselves to be extremely resilient through retail market challenges and having just come through [Covid-19], one of the most significant challenges in the sector, it is hard to ignore the opportunity and return profile on offer in the subsector.

“The Cobalt Collection is a notable example of this resilience at an individual asset level. It offers an incoming investor scale, diversified income and stability in the sector as a portfolio. Each scheme’s individual performance is exceptional, serving as prominent retail hubs within their catchment areas.”