Private investors likely to buy Square shops worth £16.5m

 

Sixteen shop investments with tax breaks at The Square in Tallaght, Co Dublin, are likely to be bought by private investors when they are offered for sale by tender on October 2nd. The portfolio is being sold by Bank of Ireland Asset Management at a time when there is a pent-up demand for prime investments.

The sale is expected to yield around £16.5m for the fund which has not been able to fully avail of the valuable tax concessions. The original tax shelters are being restored to enhance the value of the shops and to broaden the appeal of the investments.

The joint selling agents, Edmund Douglas, of Douglas Newman Good Commercial, and Brendan Walsh, of Brendan J. Walsh and Associates, are to offer the shops for sale in 16 individual lots or in one or more lots. The agents are advising likely purchasers that they should budget for initial yields of under 6 per cent on the investments. Seventeen shop investments without any tax allowances at the Merrion Centre in Dublin 4 were recently sold by Dunloe Ewart for yields of around 6 per cent.

Investors buying into The Square will obviously be banking on significant rental growth when the next review takes place in the year 2000. Zone A rents for the shops average around £80 per sq ft compared to £100-plus in Blanchardstown Town Centre and £130 in Liffey Valley Shopping Centre, which opens at Quarryvale next month.

Virtually all the shops going for sale are let under 35-year leases from the opening of The Square in 1990 and are subject to five yearly upwards-only rent reviews. The current income of £800,000 per annum ranges from a rent as low as £17,000 for the smallest shop, Gullivers Travel, to £125,000 for the largest, Burger King. The guide price suggests that the 223 sq ft Gullivers Travel shop could sell for around £350,000 while Burker King with 3,671 sq ft should make in the region of £2.4 million.

On the same basis, the RTV Rentals shop, with 950 sq ft and a rent of £41,500 should fetch about £850,000; a unit of 851 sq ft rented by Tesco at £48,000 per annum might make close to £1 million while a shop of 1,689 sq ft rented by the Sears Group for its Millets operation at £74,000 per annum will be expected to attract offers around £1.5 million.

The other shop investments going for sale are Cosy Textiles and Gifts and Nath Brothers with a combined rent of £49,030; Justyne Flowers and Madigans Jewellers with a combined rent of £28,275; Body Shop, £45,000; Perfume Shop, £50,000; Clarks Shoes, £52,500; Signature, £61,000; Chance Boutique, £51,156; Abrakebabra, £52,500; Poundworld, £52,250; Funny Biz, £28,000; Mannings Golden Croissants and Person to Person, with a combined rent of £50,000. Bank of Ireland Asset Management was one of the original investors in The Square along with Bank of Ireland Staff Pension Fund and AIB Investment Managers. Mr Noel Smyth's company, Avietta bought blocks of shops, and businessman Ken Rohan also invested. Two years ago, Irish Life and Canada Life funded a second phase development for almost £16 million at The Square which did not qualify for tax breaks.

The decision by the Bank of Ireland fund to dispose of its Tallaght investments at this stage will come as no surprise as the institution now has a heavy weighting in retail investments since it took over the New Ireland portfolio. There is likely to be strong interest in the Tallaght portfolio even though capital allowances are nominal compared to the current value.

The prospect of a handsome growth in rents in two years time will broaden the appeal of the investments. Private investors have become major players in the commercial market in recent years and with residential investments now out of bounds since the Bacon report, additional interest is being taken in retail and office properties of a manageable size.

Though the sale will coincide with the opening of the Liffey Valley Shopping Centre, no one knows with any degree of certainty what effect the Quarryvale centre will have on The Square. When Blanchardstown Town Centre first opened, it clearly hit business in Tallaght. However, The Square has since bounced back and is now trading well.