Like a princess waking after a thousand years of sleep, the Irish retail investment scene is yawning and stretching and wondering which handsome prince is about to smother its upturned face in kisses.
As you will remember, back in 2008 Irish shopping centres pricked their collective fingers on some sharp Celtic Tiger claws. Lost years spent in a coma followed. Some are still in a coma – Longford’s ghost shopping centre is the spookiest (see box) – but others are back in the land of the living.
Green Properties’ Blanchardstown is foremost among the sunshine-fresh possibilities now tempting investors. A €1bn (£793m) sale is imminent – days away perhaps – and when concluded will be the first seriously big non-distressed sale of a major Irish retail asset since the republic’s economy pulled out of recession.
Among the suitors said to be gathered round Blanchardstown’s lovely 1.25m sq ft of prime Dublin retail are US investor Blackstone, local investor Chartered Land and partner Morgan Stanley, and the Canada Pension Plan Investment Board. Norges Bank is also said to have had an eye on Blanchardstown, but missed the final cut.
Green refinanced the 20-year old centre last year in a €750m deal that is understood to have assumed a €900m capital value. The slightly higher sale price reflects rising Irish consumer sales, the growing appeal of a 272,000 sq ft extension, for which planning permission is already in place, and the further 1m sq ft of retail and 600 apartments envisaged in the masterplan. The centre has 97% occupancy.
Neither Green nor its advisers, JLL and Eastdil Secured, would comment, but the consensus is that Green will get its €1bn asking price.
A senior figure close to one of the bids said: “Blanchardstown is so large that it is not typical of the retail investment market. But what the sale is showing us is that, just like in the office market, we are seeing a return to the core buyers – institutions, the larger pan-European buyers. They’ve all looked at Blanchardstown.”
However, not everyone who looked at Blanchardstown made a bid – and the response to another deal explains why, say observers.
Hammerson/Allianz’s €1.85bn acquisition of Dundrum town centre and other shopping centres (all part of Nama’s Project Jewel disposal) is said to have created a slightly destabilising atmosphere. New development at Dundrum could be a challenge to Blanchardstown – hence Green’s anxiety to sell sooner rather than later, before a new owner gets its feet under the desk.
Hammerson chief executive David Atkins said the Dundrum deal was a chance to “increase our exposure to Europe’s fastest-growing economy”, but the Hammerson share price suffered a jolt when the deal was announced and analysts at Bank of America Merrill Lynch raised concerns about “risks in the execution of the business plan”, which requires Hammerson to recover control of the physical assets.
The upshot for Blanchardstown is to cool buyer interest slightly. One adviser said: “If some of the REITs and quoted buyers haven’t bought into it, it would be thanks to the muted response to Hammerson’s acquisition of the Dundrum debt. Buyers such as Land Securities probably look at that and wonder if they want the same.”
The Dundrum and Blanchardstown deals come as a host of more opportunistic buyers consider exits from Irish retail assets acquired at distressed prices. With Irish retail sales figures rising – up 0.3% a month, and 11% in the last year – they know the moment to maximise their profit has arrived.
Matthew Weiner, chief executive at U+I, is eyeing up Irish retail with joint ventures in mind. He says the market is normalising. “We’re seeing more long-term players, less short-term private equity interest. There are sovereign wealth funds in the market that missed out last time. And in this market, it’s all about asset management.”
If there are lingering worries, say Weiner, it is about liquidity in an Irish market that, however fast it is recovering, remains alarmingly small.
Clearly liquidity has neither deterred international buyers Hammerson or the Blanchardstown suitors, nor has it slowed the pace of sales in a retail investment scene that generated trades totalling €257m in the first quarter alone, according to CBRE.
Driven by overseas money, this turnaround is massive compared with the recent past. CBRE research director Marie Hunt says: “Retail accounted for 23% of overall asset sales in 2014 and 29% of overall asset sales in 2015 – excluding the Project Jewel loan sale – so this is a move in the right direction.”
By far the largest of the 16 retail transactions was Deka’s €180m purchase, off a €150m asking price, of the 321,000 sq ft Whitewater Shopping Centre in affluent County Kildare. The super-fast sale marks a return to the market by Deka, which debuted in 2005 with its acquisition of Cork’s Mahon Point for €250m, and then sensibly went quiet.
Larry Brennan, head of retail at Savills, joint agent with Coady Supple on the Whitewater sale, says asset management is “absolutely very significant” in the newly-revived retail scene. “Any large shopping centre scheme will still have tenants on abatements or concessionary rents, so there will be scope for changes. That might involve downsizing some retailers, or reconfiguring internal areas. There are more opportunities of this kind than there have ever been.”
Athlone’s 154,000 sq ft Golden Island shopping centre could also be an asset management possibility. In March Credit Suisse acquired the 20-year-old centre from Tesco for €43.5m, off a €40m asking price – below the €52m that Tesco was rumoured to have paid in 2005.
The sleepy princess of Irish retail property is stirring. And when Blanchardstown sells, everybody will want to be her new friend.
Time to rethink…
The 180,000 sq ft Dun Laoghaire Shopping Centre is undergoing a €10m refurbishment – one of the first in the latest wave of asset management plays.
Jason Miller at Murphy Mulhall, which is advising on the project, says: “This was Ireland’s first multi-storey shopping centre, but its relevance has waned, with lots of small units of 600-1,200 sq ft. We’re taking back units to create bigger anchor spaces of 35,000 sq ft and 20,000 sq ft, and we have had offers on the larger unit with three parties interested in the smaller.”
Simultaneously a new façade will create a brighter look. “Less like a warehouse, more like a shopping centre,” says Miller. Rents in the centre, owned by local landlord Coltard, range from €25-€45 per sq ft.
Still sleeping soundly
Ireland’s “ghost” shopping centre could be released from purgatory.
The 107,000 sq ft Longford mall has been haunting the town since the day building work was completed in 2009. No tenants ever moved in. No shopper has ever crossed its threshold, a till has never rung up a sale. As dead parrots go, this is a shopping centre.
Longford County Council is now attempting to revive the centre by linking it to the 18-acre former Connolly Barracks next door. Together they could comprise a new destination for the Irish Midlands – folk music has been mentioned. The sale comes as Center Parcs gets closer to a 2019 start on a 375-acre holiday village nearby at Newcastle Wood, near Ballymahon.
Roger Hobkinson, director of destination consultation at Colliers International in Dublin, and an adviser to the council, says: “We have a consortium of local developers and investors interested, and some promoters, and we expect the buyer to be domestic Irish money. But we are also offering this through our US offices because there’s huge American private equity interest in Ireland.”
There is no asking price for the combined lot (although the shopping centre has been priced at between €1m and €6m). Leisure, retail, residential – anything will be considered.
“The barracks and the shopping centre are in different ownerships, but I think everyone sees the virtue of playing the lots together. Longford is quite a challenged town.”
The centre was the work of Bernard McNamara, one of the giants of the Celtic Tiger period whose vast portfolio ranged from the iconic Shelbourne Hotel in Dublin to London assets including a slice of Canary Wharf. His building business, Michael McNamara and Company, fell into difficulties. NAMA took control of the Longford asset, and the shopping centre that never opened has been empty and silent ever since.
New build
The prospects for new large-scale retail development seem to depend on one man: Joe O’Reilly of Chartered Land.
Chartered Land has long been associated with Dundrum Two, a
5.5-acre slice of the old village centre not developed when the main shopping centre opened in 2005. Today O’Reilly is believed to be negotiating the future of Dundrum on behalf of the owners of the Project Jewel loan portfolio, Hammerson and Allianz.
Dublin Central is also one of Chartered Land’s prospects. The dormant scheme, finally approved after taller buildings were removed in 2010, is to occupy a 5.2-acre site on super-prominent O’Connell Street. A mixed-use boom-time development of 1.7m sq ft shrank to 800,000 sq ft by 2010 and has since had a close call with the expiration of its planning consent.
Observers suggest that Chartered is preparing to revive the project. Chartered’s spokeswoman preferred not to comment on either Dublin Central or Dundrum Two.
Retail in numbers
11%
annual rate of Irish retail sales growth
€257m
value of retail investment transactions in Q1 2016
€30m
Difference between asking price and sale price at Whitewater Shopping Centre
€50m
rent roll at Blanchardstown shopping centre
Source: Central Statistical Service, CBRE, Green Properties
