The pension fund of staff at Arnotts department store will cover part of the cost of the €65 million the company plans to spend acquiring property in Dublin city centre.
It emerged this week that the former listed company had agreed to pay €65 million for a series of properties comprising Independent Newspapers' offices on Abbey Street and four shops on Henry Street.
The Irish Times learned last night that the staff pension fund is one of the investors in the two-acre property bank. The pension fund is independent of Arnotts, and is managed by trustees drawn from both staff and the Arnotts board.
At the time of the management buyout led by director Mr Richard Nesbitt SC, the pension fund had expressed an interest in taking a financial stake in the venture. The Takeover Panel ruled it out.
It is understood that the company is negotiating with developers interested in taking 40 per cent of the total property investment.
The pension fund held 2.28 million shares, or 12.8 per cent, of Arnotts plc before management buyout (MBO) vehicle, Nesbitt Acquisitions (now Arnotts Holdings), took the retailer private last July.
The MBO paid €32 million for the shares. According to the prospectus produced by Nesbitt Acquisition's before the buyout, the pension fund already had a €141.5 million surplus, more than twice what it needed to cover its liabilities.
As a result of the MBO, Arnotts Holdings has to repay €215 million to Anglo Irish Bank and €30 million to its private backers, Boundary Capital, over 10 years. Sources pointed out yesterday that this left it with little scope to pay for new acquisitions.
It is not clear what share of the deal the pension fund has taken. However, the Henry Street properties which Arnotts bought from Royal and Sun Alliance, are typical pension-type investments, as they have long-standing tenants, including HMV and Boots. They are producing yearly rents of €1.3 million. The Independent building, which needs re-development, would not necessarily fit with a pension fund, sources said yesterday.
The fund also owns the building leased by retailer, Wallis, on Dublin's Grafton Street, while Arnotts has the adjoining River Island premises. Arnotts yesterday scotched rumours it was set to put both on the market.
All company staff pension funds have to be independent, but they are allowed some scope to invest in their beneficiaries' employer and its activities.
This week's deal is reportedly designed to position Arnotts to cash in on the view of property professionals that Henry Street is set to challenge Grafton Street as the capital's leading shopping thoroughfare.
Arnotts was one of the oldest listed companies on the Irish Stock Exchange before it was taken private last summer.
