Israeli firm to invest in Roscrea

A major international investor is to pay €13m for a new Tesco store in a move likely to take market by surprise

AN ISRAELI property investment company is to forward purchase a new Tesco store in a newly redeveloped town centre in Roscrea, Co Tipperary. Ravad plc, which is listed on the Israeli stock market, is to pay €13 million for the 4,273sq m (45,000sq ft) supermarket in a deal that will show a return of 7 per cent.

The sale may well encourage Nama to proceed with the disposal of some of the many Irish retail property assets under its control after buying in the distressed loans at substantial discounts.

The Government has signalled that it wants Nama to move ahead with its disposal programme. While the Tesco brand undoubtedly has a broad appeal among international investors, the decision by a major player like Ravad to invest in a provincial town in Ireland will take the market by surprise.

Tesco has completed contracts to lease the new building for a period of 20 years with a break option in year 15. The initial rent of €950,000 will fluctuate in subsequent rent reviews in accordance with the consumer price index.

Sean O’Neill of specialist investment property advisers, TWM Select, who advised the the developer, Tiernan Properties, said he was aware of a number of overseas investors looking to acquire high quality retail and office investments here showing yields of at least 6.5 per cent.

Having traded out of a 1,858sq m (20,000sq ft) store in Roscrea for more than 20 years, Tesco opted for a building more than twice as large when Tiernan Properties set about redeveloping the shopping centre.

The new store, currently under construction, is being built over a 224-space car park.

The store will be linked by plaza to the old supermarket which is being converted into a shopping mall with retail units ranging in size from 9.29sq m (100sq ft) up to 1,579sq m (17,000sq ft).

In 2007, Tesco’s new distribution warehouse in Donabate, Co Dublin, made a strong price in a sale and leaseback deal.

A business syndicate assembled by KPMG paid €116 million for the plant which extends to 72,462sq m (780,000sq ft).

Roscrea shopping centre was developed in 1992 by Limerick businessman Michael Tiernan. He was also involved in shopping centres at Arthur’s Quay in Limerick and other centres in Longford, Tuam and Athlone.

TWM Select was set up earlier this year by three experienced advisers in the property, investment and finance markets, Sean O’Neill, Ciaran Sudway and Derek McGrath.

They have already handled almost €250 million worth of investment deals.