The sale of two of Co Cork’s most substantial retail assets closed last month in off-market deals totalling €78 million.
Mahon Point Retail Park, adjacent to Mahon Point Shopping Centre, has been purchased by Iput, one of the country's largest property funds. While the fund declined to comment on the purchase price, it is understood from industry sources that it paid €56 million for the prime retail park, securing a 7 per cent net initial yield on its investment. The retail park comprises 10 units, which are fully occupied by tenants that include B&Q, PC World and Argos, extending to 14,605sq m (157,207sq ft) in total. It has 600 parking spaces.
Cork-based O'Callaghan Properties developed the retail park in 2006. Last year, fully-performing loans worth more than €300 million secured against properties within the O'Callaghan group, dubbed Project Lee, were sold by Nama to Deutsche Bank, including the loans secured against the retail park.
At the time of the sale O’Callaghan Properties said that it would enable the property firm to focus on its core office and residential development portfolio, and hence the sale of the retail park may have been intended to reduce its debts by disposing of retail assets that are no longer considered core to its business.
Iput has been active in both disposals and acquisitions of retail investments this year. It disposed of its minority interest in the Pavilions Shopping Centre in Swords, north Co Dublin, for a reported €71 million in recent months as part of its strategy to focus on leading out-of-town retail parks. In Dublin, it owns The Park in Carrickmines and co-owns Airside Retail Park in Swords. Following its acquisition of Mahon Point Retail Park, the value of its retail investments now accounts for 20 per cent of its €2.55 billion portfolio.
Iput cited Cork's expected growth as one of its key motivations for investing in the retail park. The fund stated that the population of Cork is set to almost treble under the combination of the National Development Plan for 2040 and the extension of the city boundaries.
CastleWest deal
Those growth prospects may also have attracted a fund managed by Davy to acquire CastleWest Shopping Centre in Ballincollig last month for an estimated €22 million.
Originally developed by O'Flynn Construction Group in 2005, the shopping centre is understood to have formed part of a portfolio of mortgaged properties whose loans were acquired by international fund Blackstone in 2014. A consensual agreement reached between Blackstone and the O'Flynn group in 2015 is understood to have resulted in Blackstone taking control of various assets, which also included the 17-storey Elysian tower in Cork city, which the investor sold to Kennedy Wilson last year for a reported €95 million. Since taking control of the Ballincollig shopping centre, Blackstone has rebranded it as CastleWest.
Davy did not comment on the transaction, but it is understood that the centre is currently producing a rent roll of about €1.9 million with occupation levels standing at about 80 per cent. The purchase price and rent level suggest that the Davy-managed fund will enjoy a net initial yield of 7.96 per cent after standard purchaser costs, which could be boosted by securing tenants for the vacant elements. The 43 retail units span some 13,186sq m (141,933sq ft) and retail tenants include Sports Direct, Eason and New Look.
National outlook
Retail investments worth €96 million transacted nationally in the second quarter of this year, covering April to June, according to Kate Ryan, BNP Paribas Real Estate's head of research. Due to the large scale of the Cork transactions, some 81 per cent of retail investment activity was concentrated in Cork during the period. When other transactions are taken into account, such as the sale of a €20 million residential investment asset, Cork accounted for 10 per cent of the overall national investment market for the quarter.
About €1.2 billion was invested in total during the period, which Ryan describes as “the strongest quarterly turnover since Q4 2016”. Ryan’s research indicates that Irish investors were particularly active during the period, accounting for about 56 per cent of turnover, compared with just 32 per cent of turnover during the first three months of the year.
Cork's retail investment market is booming both on foot of these recent sales and in addition to the planned sale of Wilton Shopping Centre, should a buyer emerge this year. The property is currently on the market guiding €86 million on the instructions of its owners York Capital and Paddy McKillen's Clarendon Properties.
