Bewley’s Cafe and a company owned by property developer Johnny Ronan have gone to the High Court in a row over €747,000 per-year rent for the Grafton Street outlet.
Mr Ronan’s RGRE Grafton Limited has said the rent should actually be €1 million, while a valuer called by the famous coffee company said it should be €518,000.
The High Court heard that prior to October last year, Bewley’s had been paying €1.46 million for the same premises but that figure was reduced following a rental valuation by the Circuit Court.
The High Court appeal was taken by Bewley’s Café Grafton Street Ltd (BCGSL) through Beauchamps solicitors, led by Simon Murphy, against the rent granted to RGRE Grafton Limited, which owns the building located at 78-79 Grafton Street, Dublin 2.
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RGRE Grafton has cross-appealed the decision. The difference between the two sides’ figures over a five-year rental period amounts to over €2.5 million.
The case centres on the methods behind the valuations of both sides.
The court has been told that BCGSL held the lease on the building from 1987 for 35 years, a deal that expired in August 2022.
BCGSL then received a new tenancy under Part II of the Landlord and Tenant (Amendment) Act 1980.
In October, the cafe had its annual rent halved following a ruling by Judge Jennifer O’Brien, who said it should have to pay a rent of more than €738,000 per year.
That figure was later adjusted to €747,000 – still a 50 per cent drop from the previous €1.46 million being paid.
The Circuit Court found that this fairly represented what a willing tenant would pay and a willing landlord would take for the premises as of August 2022 over a five-year lease term and that BCGSL was entitled to almost €1 million for rent paid since the expiry of the previous lease.
Both sides are appealing the decision of the Circuit Court.
Fergus Crosse, an expert valuer retained by BCGSL, told the High Court that improvements to the Bewley’s building made by BCGSL also meant that the gross rent should be reduced.
Mr Crosse was of the opinion that the statutory rental value of the property was €518,000.
David Potter, a valuer with Savills, was retained by RGRE Grafton. He said the statutory rent should be €1 million annually.
Mr Crosse told David Whelan SC, for BCGLS, that he employed a “zoning” of arrears of the floor space at the cafe which meant that Zone A, closest to the entrance, would be the most valuable.
Each tranche of zones was measured at 20 feet from the entry. Mr Crosse said he used comparator properties on Grafton Street in his analysis and that Zone B would be valued at 50 per cent of Zone A and that Zone C would be valued at 50 per cent of Zone B.
Mr Potter said an “overall” view was more effective in determining the rent and that the use of the zoning model in this case led to a “misvaluation”.
Mr Potter said the use of the zoning model meant the restaurant floor space far from the door was now valued at a lower rate by Mr Crosse which “undervalued” the restaurant area.
“Bewley’s space at the back is big money, it’s the main restaurant,” said Mr Potter.
“It can’t be valued as if it is the cheapest, worst space. Zoning undervalues it significantly, as if the rear is ancillary, but it is not – it is a really attractive restaurant.”
Mr Potter said that a valuation of €24 per square foot of the restaurant area – while the staff room in nearby McDonald’s restaurant was valued at €60 per square foot – amounted to a “fundamental misvaluation”.
He said he was valuing the property as a restaurant and not a restaurant-retail use agreement and that Dublin City Council previously gave an opinion that it would prefer the use of Bewley’s to be maintained as a restaurant and not a retail outlet.
The case continues before Ms Justice Sara Phelan.
