The sale of Tesco’s supermarket premises in Roscrea, Co Tipperary, offers investors the opportunity to secure an attractive net initial return of 9.82 per cent.
Owned by an overseas syndicate, the property has been brought to the market by Sean O’Neill of agent TWM at a guide price of €8.8 million. While the investment had been offered for sale originally as part of the wider “Supermarket portfolio” in late 2017, several approaches in relation to its various assets informed the vendor’s decision to pursue a series of individual transactions.
As recently as last October, the French asset management company, Corum, paid over €20 million for Tesco's premises in Gorey, Co Wexford, providing them with a net initial yield of 7 per cent. In a previous transaction, another investor acquired Aldi's supermarket premises in Cahir, Co Tipperary, for over €4 million, securing a net initial yield of 6.3 per cent in the process.
In the case of the Tesco in Roscrea, the prospective purchaser has the opportunity of securing a 10.2 per cent return within two years of acquiring the property.
Uplift
The lease to Tesco provides for an uplift in the rent through a consumer price index-linked (CPI) mechanism whereby the accumulated CPI uplift over the first 10 years of the lease is applied to the rent. As of today the rent, ignoring any uplift over the next two years, would increase to over €989,000. This would increase the investor return to 10.2 per cent.
The property is let to Tesco Ireland on a 35-year full repairing and insuring (FRI) lease from July 1st, 2011. There is a tenant break option after 15 years which is in 2026. The current annual rental income is €950,000.
Built in 2011, the property comprises a modern, detached retail building with supermarket at ground-floor level and car parking at lower ground floor. The property extends to 4,333sq m (46,640sq ft) with 224 car spaces.
Tesco Ireland is a wholly-owned subsidiary of Tesco Ireland Holdings Ltd with the ultimate parent company being Tesco plc. The accounts for Tesco Ireland are prepared on a consolidated basis in the accounts of Tesco plc which reported group sales of £56.9 billion for the year ending February 23rd, 2019, up 11.5 per cent from the previous financial year with group operating profit up 35 per cent.
Tesco has a 21.1 per cent share of the grocery market in Ireland. The company has 151 stores in Ireland and employs about 13,000 people.
