€115m for provincial retail portfolio

The successful Wilton Shopping Centre in Cork along with strongly performing retail parks in Drogheda and Galway will be sold in a single lot on the instructions of Nama.

Joint agents Bannon and DTZ Sherry FitzGerald are quoting €115 million for the Hazel portfolio which can deliver an immediate return of 7.47 per cent on an operational rental income of just under €9 million.

Wilton will be seen by the investment market as rating second only to Mahon Point in the highly competitive Cork retail sector. Both Drogheda Retail Park and Gateway Retail Park on the west side of Galway city also have good trading records.

All three centres have a particularly low vacancy level, strong tenants and, unlike many of the portfolios recently offered for sale, are not burdened with excessively over-rented shops.

Well-managed

The three centres have clearly benefitted from astute management and good development skills. Traders across the portfolio include

Tesco

,

Dunnes Stores

,

Penneys

, TK Maxx,

Homebase

,

Harvey Norman

,

Next

, B&Q and New Look.

The net operational income of almost €9 million takes into account a number of rent abatements, all-inclusive deals and irrecoverable landlord income.

The overall rental income comes from 92 tenants who occupy 37,800sq m (406,871sq ft) in the three centres.

Rent of €5m

Wilton is the most valuable asset going for sale, accounting for around €70 million of the total value. It has a 98 per cent occupancy rate and is anchored by Tesco and Penneys.

Tesco owns its own store and at one stage – around 2004/5 – it also owned the Wilton centre before selling it to businessman Joe O'Donovan and Howard Holdings for a reported €124 million. Mr O'Donovan later bought out Howard Holdings' 40 per cent stake for an undisclosed figure.

Penneys pays the highest rent in the centre, at €1,260,000, and has 17 years to run on its lease. The other household names in the centre include New Look, Skechers, Life Style Sports, Boots and Easons. The centre has a rent roll of over €5 million from an overall floor area of more than 10,000sq m (107,638sq ft).

The average unexpired lease term is just over nine years. The next owners might well avail of planning permission to provide a substantial extension to the centre. If and when this happens Penneys plans to relocate to a larger store.

Drogheda Retail Park accounts for around €30 million of the overall valuation of the portfolio and produces a rent roll of €2.5 million from 13 retail warehouses extending to 19,880sq m (214,000sq ft).

The complex, one of three retail parks in Drogheda, was developed by local businessmen, Séamus Domegan, Phil Dillon and Pat Fallon. The principal tenant is Homebase which pays a rent of €660.000; Harvey Norman, which is on an abated rent of €431,455 until later this year; and TK Maxx, which pays €236,225. Also included in the sale is a building in Newgrange Business Park let to Blackstone Motors at a rent of €120,000 a year.

The second retail park for sale, Gateway Retail Park, with a price tag of over €15 million, is in a highly populated Galway suburb which will undoubtedly benefit from its proximity to the planned new city bypass.

The park was developed by property veteran Michael Whelan and produces a rent roll of €1.4 million. The 7,798sq m (83,936 sq ft) park is fully occupied by B&Q, Next, New Look and McSharrys Pharmacy.

The complex also has a substantial Dunnes Stores which is owned by the multiple and which was permitted because of the unusual open-consent retail use allowed by the planners. There is immediate scope to enlarge the centre because of the availability of an adjoining 3.94 acre site with full planning permission for a second phase extending to over 9,290sq m (100,000sq ft).

Planning permission

There is considerable confidence that additional retail space would attract some of the multinational fashion chains which are unable to find suitable outlets in the city centre. The park also has a further 5.45 acres of commercially zoned land alongside the entrance with planning permission for a drive-through restaurant to further diversify the offering.

One of the strong selling points are the 700 parking spaces at both basement and surface level.

Rod Nowlan of Bannon and Karl Stewart of DTZ Sherry FitzGerald, who are handling the sale of the Hazel Portfolio, said the sale would provide investors with an opportunity to access a cross section of the retail market with high quality schemes which were imbedded in their respective catchments.

All three assets have a low vacancy level and a strong tenant line-up and, unlike many recent provincially focused portfolios, the three centres are not overburdened with excessively over-rented units.

The fundamentals were secured off the back of two strong cities and a thriving Dublin commuter town.