Bank of Ireland Private Banking and Hercules Unit Trust have sold London shopping centre Gallions Reach to Standard Life Investments for £192 million (€282 million), netting almost £100 million for the bank's clients.
The bank's private banking arm bought its share in the Gallions Reach Shopping Park in London's east end in October 2004 and since then the value has risen by almost 40 per cent. The shopping centre, which opened in 2003, comprises 209,000 sq ft of retail accommodation - the only such centre within London's M25 ring road. It is adjacent to a large Tesco Extra outlet and has tenants including Next, Topshop and Boots.
"The performance of the asset has been ahead of our expectations in the period since we purchased in late 2004," said Enda Bracken, head of property asset management at Bank of Ireland Private Banking.
"At this juncture, given the strength we see in the retail sector, we believe that it is opportune to realise the substantial gains made," said Mr Bracken.
Retail outlets, such as Gallions Reach, have traditionally been one of the better performing areas of the UK property market, which has in general been quite buoyant over the past decade. Independent research by IPD shows the retail sector has outperformed every other section of the market over the past 10 years.
However, some industry sources believe it may be starting to plateau as rising interest rates dampen consumer spending and put pressure on shop tenants. As a result this could be seen as a good time for Bank of Ireland to exit this particular investment.
"When we first invested in Gallions Reach, we saw shopping parks as a distinct property play and potentially one of the better performing sectors in the UK property market," said Mr Bracken. "Despite the relatively short period for which we held the asset, our investors have seen returns on their equity of just below 40 per cent."
Mr Bracken denied that the group was seeking to exit the UK market completely, saying it continued to see opportunities in the region and expected to make several announcements in the coming months.
Bank of Ireland Private banking has several hundred million euro worth of European property investments, including recent acquisitions in France, Scandinavia and the Far East.
Separately, a spokeswoman for Standard Life Investments, Gallions Reach's new owner, said it plans to divide the centre between three of its investment funds. She said the company had been attracted to the property because of its proximity to the location of the Olympic Games, due to be held in the east end of London in 2012.
At the same time the Edinburgh-based investment group also agreed to buy a currently undeveloped site adjoining Gallions Reach for £16 million from UK property group British Land. The site has planning permission to provide 58,500 sq ft of retail space.
