ONE OF THE best performing retail investments in Galway city, the Edward Square shopping enclave off William Street, is to be offered for sale on the Irish and overseas markets.
Joint selling agents DTZ Sherry FitzGerald and DNG Commercial are quoting a guide price of €27 million for the six stores in the portfolio which will show a net initial yield of 8.62 per cent.
Edward Square is one of a number of distressed properties transferred to Nama by Gerry Barrett’s Edward Holdings. Company loans now being managed by the State asset manager are estimated at several hundred million euro.
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; Guild House in Dublin’s IFSC; Barna House apartments; and commercial sites in Galway, Waterford and Cork.
Barrett’s company recently sold the former Bow Street courthouse in London and the old Jesuit hostel Hatch Hall on Dublin’s Hatch Street, which were originally to have been redeveloped as hotels.
Along with the retail element of Edward Square, Nama 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.
With bank credit still extremely difficult to source, Nama may well provide up to 70 per cent of the purchase price to qualifying buyers for Edward Square at an overall cost of about 4 per cent.
Nama’s decision to proceed with the sale of the Galway investment may well signal a more assertive attitude by the State agency to dispose of profitable retail assets held by heavily indebted developers.
Should this prove to be the case, then buyers are likely to have a wide choice between viable retail investments and shopping centres over the coming months.
Edward Square is already producing a rental income of €2,273,800 per annum, a figure that will rise to €2,435,517 next October when a fixed rental increase kicks in at the Dunnes Stores unit.
The fact that the five other stores in the complex are all occupied by top rank names – A|wear, Oasis, Miss Selfridge, Next and Topshop – should ensure that the overall investment will readily appeal to wealthy overseas buyers as well as a small number of Irish institutions.
Patricia Ward of DTZ Sherry FitzGerald says the Edward Square portfolio “ticks all the boxes for a prime investment”.
The pitch couldn’t be better and the individual shops were all up to international retail standards. Ms Ward said this was particularly relevant in a city with a very limited supply of high street opportunities.
The Government’s decision to reduce stamp duty from 6 to 2 per cent along with the introduction of a capital gains tax waiver on commercial property acquired before the end of 2013 and held for at least seven years has been heavily promoted as a means of attracting overseas funds into the market.
One of the strong selling points of this particular sale is that Edward Square serves as one of the access points to Eyre Square shopping centre and forms part of the city’s unusually short high street where trading opportunities are both scarce and expensive.
The initial return being offered on the investment of 8.62 per cent compares favourably with the 10-year average retail yield of 5 per cent recorded by IPD.
Dunnes is paying a rent of €730,100 for 5,120sq m (55,110sq ft) divided almost equally between grocery and drapery/homewares. The unit also includes 324sq m (3,487sq ft) of storage space. Dunnes’ rent will rise to €888,817 from October next.
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 more than 691sq m (7,440sq ft).
Next has a retail area of 761.63sq m (8,198sq ft) for which is pays €445,000.
Oasis has a rent bill of €200,000 for 229sq m (2,464sq ft).
Miss Selfridge pays €183,500 for a floor area of 171.91sq m (1,850sq ft) while A|wear has agreed a base rate 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 451sq m (4,854sq ft).
A small retail unit at the rear of A|wear is let at €6,300 per annum.
