Tesco is to pay €52 million for the Golden Island shopping centre in Athlone in a deal that will allow it to increase substantially the size of the complex and its own store. Jack Fagan reports.
The giant multiple also hopes to avail of about €12 million in capital allowances now due to be clawed back from the group of 12 investors who bought the centre seven years ago in a tax-driven investment transaction.
The Department of Finance is expected to look closely at this tax break as part of an overall review of capital allowances announced in the Budget. Two years ago the Department changed the rules to ensure that investors only used capital allowances to offset tax on their rental income rather than all income.
Although they will lose the capital allowances, the 12 investors have done exceptionally well on the sale, having bought the centre in 1997 for around €18 million.
The developers included the Cork businessman Mr Owen O'Callaghan, who apparently persuaded the Government to grant urban renewal tax breaks for the scheme.
Apart from Tesco, the 12,077 sq m (130,000 sq ft) centre has more than 40 tenants who currently pay a rent roll of €3 million. The rents are due to be reviewed in about two years but they are unlikely to rise significantly because that exercise will coincide with the ending of the double rent allowances to the traders.
Apart from Tesco, other notable tenants in Golden Island include Easons, Penneys, Boots, Thorntons, Claire's Accessories and Sasha.
Although several investors had been interested in pitching to buy the shopping centre, Tesco always had the upper hand because of a clause that only obliged it to open for business over a 10-year period.
The company insisted on this condition after having been forced by court order to re-open another store in the nearby Athlone shopping centre.
Agents specialising in the retail business say that Tesco will have considerable scope to enlarge Golden Island by developing part of its sizeable car park. However, it may have difficulty securing early planning permission because of a desire by the planning authorities to allow a rival shopping centre to proceed close to the town centre.
The town council has granted planning permission on two occasions for the proposed 18,580 sq m facility and, for the second time, the decision is being appealed to An Bórd Pleanála.
