Investors circle sale of Liffey Valley

The companies selling a 50 per cent stake in the Liffey Valley centre may have to trim back their expectations to achieve a sale

SEVERAL PARTIES have signalled their interest in buying into Liffey Valley shopping centre in west Dublin despite the bank lending crisis and the fall off in consumer spending as a result of the threatened recession.

Morley Fund Management and Grosvenor Estates are seeking between €300 million and €400 million for a 50 per cent stake in the centre and an adjoining development site of 7 hectares (17.3 acres) that will accommodate the second phase of the centre.

A handful of Irish property companies and investment syndicates who expressed interest in the centre have completed evaluations and some of them are now expected to submit formal offers for part of the equity. A number of them are also trying to establish whether the interests of both Morley and Grosvenor might eventually be bought out by a new partner going in at this stage.

It seems unlikely that any single Irish purchaser could hope to acquire the entire centre because of the credit squeeze and the size of the investment involved (possibly around €1.5 billion when the second phase is completed). However, it is quite conceivable that two or three Irish companies would buy Liffey Valley on a joint venture basis.

Possible participants include Green Property, which owns the rival Blanchardstown Centre on the opposite side of the River Liffey; the Cosgrave Group, which has substantial property interests in Ireland and the UK; the Kenny-controlled Clancourt Group, which owns several major office investments in Dublin and Dooradoyle shopping centre in Limerick; and wealth management companies, Quinlan Private and Warren Private Clients, both of whom have cash-rich clients.

The vendors are also expecting interest from an international fund which might be prepared to take less than the 50 per cent stake.

Even if Morley and Grosvenor eventually opted to exit from Liffey Valley, there is still the contentious issue of another adjoining six-acre site with town centre zoning which is owned by Barkhill, a company controlled by Grosvenor and Cork-based O'Callaghan Properties. Even as things stand, Barkhill is in line for compensation if it secures planning permission for the planned second phase extension.

A local area plan suggests that it could include 35,000sq m (376,737sq ft) of additional retail space. Liffey Valley already has 46,400sq m (499,445sq ft) of retail and leisure space. Initial plans for the second phase indicate that it will include a department store, five multi-storey units and 28 other shops.

With all retail values in Ireland slipping because of the threatened recession, the banking crisis and the fall off in consumer spending, the two UK companies trying to offload a 50 per cent stake in Liffey Valley may have to trim back their expectations to achieve a sale.

With the current rent roll at €31.31 million, a €300 million valuation would show a net yield of 4.6 per cent while a €400 million price tag would equate to 3.47 per cent.

However, with top rents running at around €4,843 per sq m (€450 per sq ft), the equivalent rental value is thought to be around €40 million.

Aidan O'Hogan of Savills HOK is handling the marketing of the shopping centre in Ireland while DTZ in London is looking after UK enquiries.