SCOTTISH Provident is seeking in excess of £6.25 million for a large retail investment involving Roches Stores at The Square in Tallaght, west Dublin. The sale is likely to be of interest to institutions and, more particularly, to property companies that can avail of a tax shelter. A price of £6.25 million would equate to a yield of 8 per cent.
Roches is one of the anchor tenants in The Square where it operates a 57,000-square-foot department store on the main floor. Last year, the rent was increased from £456,000 to £545,581, representing a 3.5 per cent per annum compound uplift in the commencing rent. Palmer McCormack, which is handling the sale, said the current rent of £9.50 per square foot "provided a good base for future rental growth".
Scottish Provident has not been in a position to claim capital allowances on its Tallaght investment since it bought it over a year ago. For that reason the investment still carries £4.125 million in capital allowances. These can be availed of at the rate of £217,000 per year over the next 19 years.
Despite the fact that institutions and pension funds cannot normally claim tax concessions, the Tallaght investment is still likely to be bought by one of these interests because of the strength of the covenant and the fact that most funds are anxiously looking for prime retail investments.
Even if an institution chooses to hold Roches Stores for, say, 10 years, they can still sell on the investment at that stage with more than £4 million in capital allowances.
Roches Stores was one of three investments bought by Scottish Provident for more than £13 million. The main element of the portfolio was the Frascati Shopping Centre, Blckrock, Co Dublin. Also included was a department store at the Nutgtrove Shopping Centre, Rathfarnham, Co Dublin.
When the portfolio was acquired by Scottish Provident, it was producing a rental income of £1,355,356. Roches pays an annual rent of £480,000 for its supermarket and department store at Frascati. A further 14 shops in the complex, which includes a McDonalds fast-food restaurant, produce an additional £340,000.
