Over a decade ago, developer Sean Mulryan found himself among friends of one of his daughters as she celebrated a birthday, when the conversion turned to their outfits. Most, he learned, had been purchased online.
The Roscommon native decided there and then, he would recall to associates afterwards, that the shopping centres he had assembled would be at the top of the for-sale list as he sought to raise finance to exit the National Asset Management Agency (Nama).
In late 2014, his Ballymore Group sold a shopping mall in Berlin it had acquired seven years earlier. Later that year, it offloaded a large shopping mall-to-apartments scheme it developed on the banks of the Danube in Bratislava, for a reported €360 million.
Finally, in 2016, he sold the Whitewater Shopping Centre in Newbridge, Co Kildare, which he had opened in 2006 and held a 50 per cent stake. Germany’s Deka Immobilien acquired it for €180 million.
File being prepared for DPP over insider trading
Christmas tech for kids: great gift ideas with safety features for parental peace of mind
MenoPal app offers proactive support to women going through menopause
Ezviz RE4 Plus review: Efficient budget robot cleaner but can suffer from wanderlust under the wrong conditions
[ Boutique 10-pin bowling alley operator Lane7 to open at Dundrum Town CentreOpens in new window ]
That year would mark the peak in Irish retail property deals with some €2.25 billion of assets traded, driven by overseas money chasing what was then the hottest segment of the commercial real-state market. They were led by US private equity giant Blackstone, which forked out €950 million for the Blanchardstown Centre, off the M50 motorway, and German pensions group Bayerische Versorgungskammer’s €630 million purchase of Liffey Valley Shopping Centre and adjacent development land.
But even Mulryan’s epiphany didn’t stretch to how the subsequent Covid-19 pandemic would accelerate ecommerce, nor how the recent surge in interest rates globally would further hammer commercial property values.
CBRE estimates the slump in prime shopping centre values in the past two years has pushed rental yields of malls hugging the M50 up 30 per cent, from 6.5 per cent to 8.5 per cent. Yields move inversely to property prices.
However, deal-making in the sector is back – even if sales are being driven more by necessity than opportunity. The Irish Times reported last week that Eagle Street Partners, the property asset manager founded by two former senior Glenveagh Properties executives, has been picked as preferred bidder for the Square Town Centre in Tallaght, almost two months after the landmark retail complex was put into receivership as loans on the centre eclipsed its value.
My colleague, Ronald Quinlan, subsequently ascertained the bid came in at €126 million. That will see AIB – which is owed €140 million and called in the receivers in May as a previous sale effort stalled – take a haircut on what it is owed. UK finance house M&G, a junior lender, will lose its entire investment.
[ Irish commercial property market rebounded strongly in second quarterOpens in new window ]
The Square carried a price tag of up to €170 million when its owner, Texas-based investment firm Oaktree, initially placed it on the market last year. The US group paid €250 million for 90 per cent of the centre five years ago, which, itself, marked a steep discount to a peak value of €640 million back in 2007.
This newspaper also reported this week that US Strategic Value Partners (SVP) has offered as much as €600 million for the Blanchardstown Centre as it finds itself about to change hands for the third time in eight years.
Goldman Sachs, among the financial backers of Blackstone’s investment in the complex in 2016, took control of the State’s largest mall at the onset of the pandemic in 2020 by swapping debt for equity as rental income fell sharply, driven by the liquidation of Debenhams, a former anchor tenant. The deal valued the centre at €750 million.
The Wall Street banking giant put it back on the market over a year ago, with a guide price at the time of €650 million-€725 million. It had only received bids of as much as €580 million before the SVP entered the fray. Its offer would see senior lender Morgan Stanley recover its loans, but subordinated lenders face losses. AIB was one of the junior lenders, but recently sold its €175 million of facilities to a London credit fund at a 22 per cent discount.
Footfall and rental income have rebounded since the pandemic. Occupancy levels at the M50 centres are currently running at 94 per cent, compared to 89 per cent in Dublin prime streets and almost 100 per cent across retail parks around the country, according to property consultants Bannon.
“We are past the bottom of the market. The sector has gone through large restructuring at occupier level in recent years and malls have rejigged their mix, with more focus on food and beverage and entertainment, which bring footfall,” said Colm Lauder, a former real-estate analyst, whose new firm Lingard Capital provides strategic advisory to some of Europe’s largest retail investors.
Establishing a valuations floor comes at a crucial time for another M50 mall: the Dundrum Town Centre, even if it sits in a league of its own as Ireland’s only so-called super prime shopping centre.
UK property group Hammerson and Germany’s Allianz Real Estate, the joint Dundrum owners, are currently seeking to refinance €600 million of loans secured against the centre, which fall due in September.
Hammerson booked the equivalent of €327 million of revaluation losses against Irish assets – which also include 50 per cent stakes in the Ilac Centre in the city and Pavilions shopping complex in Swords, north Co Dublin – over the past four years. The portfolio stood at about €750 million at the end of 2023.
Sector followers will be keeping a close eye on where the Dundrum refinancing is at when Hammerson reports interim results next Thursday.
- Sign up for Business push alerts and have the best news, analysis and comment delivered directly to your phone
- Find The Irish Times on WhatsApp and stay up to date
- Our Inside Business podcast is published weekly – Find the latest episode here
