Tuesday 19 September 2017

Grafton Collection to go for over €55m - 27pc above guide price

Nespresso is paying annual rent of €355,000 for its Duke Street premises. This is set to rise to €400,000 in July 2019.
Nespresso is paying annual rent of €355,000 for its Duke Street premises. This is set to rise to €400,000 in July 2019.

Ronald Quinlan, Commercial Property Editor

US real estate giant Hines are understood to be in the process of agreeing heads of terms to acquire the 'Grafton collection' - a multi-let block of retail buildings which includes the landmark Hickey's Pharmacy premises at the junction of Grafton Street and Duke Street - for a sum believed to be in excess of €55m.

Hines are understood to have fended off competition from a number of rival bidders, including Irish property fund IPUT, Irish Life and Deutsche Bank for the portfolio which was offered for sale by Savills last month for a guide price of €40m.

Assembled by the property developer and co-founder of the Cuisine de France bakery, Ronan McNamee, the overall portfolio is delivering a current annual rent roll of €1.95m.

Based on the €40m price which had been guided by Savills, the net initial yield would have been 4.62pc.

With Hines now gearing up to pay over €55m for the properties however, that yield is poised to be reduced to just over 3.2pc.

While a number of property industry sources expressed some surprise at the price, one agent said that the Grafton Street properties are "well-located" and that the yield would be very much in line with that currently being achieved by prime high street across Europe.

Hines certainly has the financial capacity to outbid its potential rivals in the Dublin market, having been given a €1.3bn mandate from Germany's largest pension group, Bayerische Versongnungskammer earlier this year to locate prime European retail assets.

The Grafton Collection was offered for sale in one or two lots. Lot 1 - which includes four adjoining buildings at 21-23 Grafton Street and 24 Duke Street - was priced at €28m, while Lot 2, at a guide price of €12m, includes the multi-let former Creation Arcade with frontage on to Duke Street, Lemon Street and Duke Lane.

The principal asset within the portfolio is a four-storey over basement building sitting at the corner of Grafton Street and Duke Street. Extending to 710 sq m (7,642 sq ft), the building's main tenant is the Hickey's Pharmacy group, which pays an annual rent of €525,000.

Elsewhere within the portfolio, Fields Jewellers are paying a rent of €445,000 for 22 Grafton Street while Claire's Accessories pay €285,000 in rent at 23 Grafton Street, which is a four-storey over basement building extending to approximately 300 sq m (3,229 sq ft). Recruitment specialists Kelly Services occupy office space overhead and currently pay a rent of €65,000.

Also included in the sale is 24 Duke Street, a retail building with an overall floor area of 154sq m (1,657sq ft), which is currently vacant but expected to lease in the short term at more than €150,000 per annum. Lot 1's total rent roll currently stands at €1.326m.

Lot 1 comes with planning permission up until 2021 to merge the three adjoining Grafton Street properties.

Lot 2 (which includes the former Creation Arcade), a three-storey enclave extending to 1,199sq m (12,906 sq ft) with frontage on to Duke Street, Lemon Street and Duke Lane, currently delivers total annual rental income of €625,000.

Among its tenants is Nespresso. Its first standalone Irish store delivers annual rent of €355,000. This is set to rise to €400,000 in July 2019.

Sunday Independent

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