With the market now in full swing and retail investments a sought-after commodity, there should be no shortage of takers for 22 shops with tax-breaks at the Market Cross centre in Kilkenny, writes Jack Fagan
The commercial property investment market has finally swung into top gear with the upcoming sale of several office buildings, a range of well located development sites and a retail portfolio of 22 shops at Market Cross shopping centre in Kilkenny.
The huge increase in activity follows a noticeable pick up in the commercial property market over the last six months and may also be influenced by profit taking and the prospects of a change of government next year which could see an increase in capital taxes.
With retail investments the most sought-after commodity over the past two years, Douglas Newman Good Commercial is likely to be overrun with bids for the 22 Kilkenny shops which also carry capital allowances.
Edmund Douglas of the agency expects to secure between €25 million and €30 million for the portfolio, reflecting a yield of 4-5 per cent, depending on the price paid. An even stronger price cannot be ruled out.
The plan is either to sell the shops on an individual basis or in one or more lots. With all the shops let on standard 25-year leases from 1996, values will be based on the size and location of the units, as well as the strength of the covenant.
Capital allowances will be worth about one-third of the purchase price.
The largest block of shops - 15 in all - are being sold for clients of accountants BDO Simpson Xavier while the other seven have been put on the market by Goodbody Stockbrokers. Clients of both firms bought the shops 10 years ago at a yield of around 8 per cent plus valuable tax breaks.
The 15 shops in the first lot still have capital allowances worth over €4.3 million as against a rent roll of €555,814. Significantly, all these tenants are due to have their rents reviewed this July with the prospect of increases of 40-50 per cent on the cards.
The second batch of seven shops carry tax breaks worth €2.4 million. The current rent roll of €452,840 will not be reviewed until 2009. These rents are not due to be reviewed until 2009.
Market Cross is located along the busy main street of the city and, though developers Town & County erred in not enclosing the shopping complex, it has still managed to trade exceptionally well over the years.
Planning permission has been granted for a glazed roof over the centre.
Apart from the shops being sold, there are at least another dozen traders there, including anchor store Superquinn along with Heatons, Penneys, Monsoon, Barratt, Adams, Unicare and Swalk.
The McDonagh Junction shopping centre planned for a site near the railway station and due to be anchored by Dunnes Stores when it opens in October, 2007, is not expected to have any significant effect on business at Market Cross. The shops going for sale include Dynasty Accessories which pays a rent of €33,962, Carphone Warehouse (€24,442), Gamestop (€39,992), Vodafone (€13,015), McGovern Fashions (€54,559), Barry & Sons (€41,901) and 42nd Street (€20,443).
