SIGNATURE CAPITAL, a Dublin-based investment company, has agreed terms for the purchase of a top performing retail complex in the centre of Galway.
The company is to pay slightly over the €27 million asking price for Edward Square, a modern shopping enclave off William Street, which was offered for sale in June on the instructions of Nama. The investment will show a net initial yield of close to 8.7 per cent.
Edward Square is one of a number of distressed properties transferred to Nama by Gerry Barrett’s Edward Holdings.
With bank credit extremely difficult to obtain in the Republic, it will be no surprise if Nama has agreed to provide the bulk of the purchase price in this instance.
Such an arrangement is not unusual and is likely to come at an overall cost of about 4 per cent.
Joint selling agents DTZ Sherry FitzGerald and DNG Commercial would not comment yesterday on the negotiations with Signature Capital, an Irish and German real estate investment company which has already acquired properties in Germany, the UK and the US valued at over €900 million.
The success of the sale may well encourage the State asset manager to proceed with the disposal of other profitable Irish retail assets held by heavily indebted owners.
The fact that the Galway investment attracted eight bidders in all suggests that there are probably buyers for many other provincial shopping centres which are hopelessly insolvent because of excessive borrowing, often for other investment projects.
Nama has been relatively slow to offload distressed Irish property assets from its over bourgeoning loan book, leaving the way open for Bank of Scotland (Ireland) and Ulster Bank to become the dominant players in the sales market.
The fact that these two banks have been prepared to settle for discounts of 75 to 80 per cent on prestigious hotel properties such as Parknasilla, Fota Island and the Burlington leaves Nama with little option but to take a fairly similar hit on some of its secondary properties, particularly poorly performing assets and development land in provincial cities and towns.
There are no immediate signs of a recovery in values though Dublin-based properties are obviously faring better than most.
Once Nama manages to shift the retail element of Edward Square it is expected to seek a buyer for 38 apartments on the upper floors of the city centre complex which are rented and producing an annual income of €380,000.
The six shops in Edward Square are currently rented at €2,273,800, a figure that will rise to €2,435,517 next month when a fixed rental increase is implemented at the Dunnes Stores unit.
The widespread interest in the centre by Irish and overseas buyers was obviously triggered by the fact that the five other stores are all occupied by top rank names – A/wear, Oasis, Miss Selfridge, Next and Topshop.
One of the critical selling points for Edward Square is the fact that it serves as one of the access points to Eyre Square shopping centre and forms part of the city’s short high street where trading opportunities rarely become available.
Dunnes is paying a rent of €730,100 for 5,120sq m (55,100sq ft) divided between grocery and drapery/homeswares. The letting also includes 324sq m (3,487sq ft) of storage space. Dunnes’ rent is due to rise to €888,817 next month.
The multiple’s 31-year lease of the premises dates from 2000 and provides for upwards-only rent reviews.
The five other shops are held on 20-year leases from 2000.
Topshop is paying a rent of €515,200 for a store extending to 691sq m (7,440sq ft).
Next has a retail area of over 761sq m (8,198sq ft) for which it pays €445,000.
Oasis has a rent bill of €200,000 for 220sq m (2,464sq ft) while Miss Selfridge pays €183,500 for a floor area of over 171sq m (1,850sq ft).
A/wear negotiated a base rent of €160,000 as well as a percentage of the turnover which is expected to bring the overall rent to more than €200,000 this year. Its shop extends to 415sq m (4,854sq ft). A small unit at the rear of A/wear is let at €6,300 per annum.
As well as Edward Square, Mr Barrett’s property holdings include Scotch Hall shopping centre in Drogheda; the G Hotel, the Meyrick Hotel (formerly the Great Southern) and the Corrib Great Southern in Galway; Ashford Castle in Co Mayo; the D hotel in Drogheda; Wellpark retail park and cinema complex in Galway; Kirwan’s Lane retail complex in Galway and Guild House offices in Dublin’s IFSC.
