Friday 19 December 2014

Motor trade accelerates as investors go hunting yield

Donal Buckley

Published 17/07/2014 | 02:30

Frank Keane Motors, Longmile Road, Dublin 12 which Lambert Smith Hampton have just brought to the market. FKM is the Tenant not the vendor.
Frank Keane Motors, Longmile Road, Dublin 12 which Lambert Smith Hampton have just brought to the market. FKM is the Tenant not the vendor.

EVEN before the latest figures showed a doubling in 1 July car sales, demand for motor show rooms had already picked up. While the pick up has not yet translated into higher property prices, it is reflected in show rooms and petrol stations selling more quickly.

This trend contrasts with the bottom of the market in 2011 after the sharp drop in car sales and the indebtedness of some dealers resulted in showrooms lying idle and looking like white elephants. At the same time service stations were closed as some international chains exited the market and many independent stations gave up trying to compete.

Now some car dealers are competing with developers, investors and other businesses for the few show rooms that come to the market near busy roads. Meanwhile Florence Stanley of CBRE says petrol service station chains Maxol, Topaz and Applegreen are competing for well located sites on busy roads.

Brendan Smyth of DTZ Sherry Fitzgerald reports having been involved in deals for six car dealer properties in this year at prices ranging between €300,000 and €2.5m.

He says demand is strongest for locations in South-East Dublin where there is also a shortage of sites on which dealers could design and build new showrooms and Cherrywood, with its SDZ fast rack has the potential to quickly meet demand with a new motor mall offering the southside's answer to Airside Motor Park in Swords.

Despite the pick-up some properties have sold at less than a third of the cost that they took to develop at the peak of the market. For instance two Co Louth showrooms are reputed to have cost €6m each to develop but one of them, in Ardee, is believed to have sold for around €1.9m and the other in Drogheda for €1.5m. Neither of them were bought by dealers.

On the other hand because the car manufacturers require all their showrooms to look the same in order to reinforce brand image, there have been instances where existing show room buildings have had to be substantially re-vamped in order to become instantly recognisable. An example of this is Bill Cullen's former Liffey Valley showrooms which CBRE sold to Frank Keane for a sum believed to have been around €2.5m. It is being remodelled from a Renault to a Volkswagen showrooms.

A similar price was reported for the sale through DTZ of Cullen's former Renault showroom at Airside Motor Park in Swords last October. Dealer Joe Duffy, who has BMW and Volkswagen dealerships was the buyer.

The highest price of the year of around €2.8m was achieved for a 1.7 acre showroom property at Arena Road, Sandyford. Wesley Rothwell of CBRE had been asking €2.5m and says that the strong price reflects its investment return. The two-storey detached, 2,332 sq m car showroom and office building is let to Spirit Motor Group, a Jaguar, Land Rover and Volvo dealer, on a 10-year lease from May 2013 at a current rent of €200,000 per annum with incremental increases to €270,000 in year 10.

The interest of investors is remarked on by Joe O'Donoghue of agents Lambert Smith Hampton (LSH) who says "Motor showroom investments can offer far better returns to investors when compared to prime office/retail sectors, and the Government's CGT incentive is also a factor in generating show room sales this year."

He also reports that because of their high profile locations a number of them are attracting interest from other types of retailers such as discount stores and even some funeral directors.

Investors with a medium to longer term view on development prospects are also buying showrooms and Brendan Smyth believes that yields of between 5.75pc and 6pc have been seen in some recent deals. An investor is also believed to have bought the showrooms at Rochestown Avenue, Dun Laoghaire which Joe Duffy leases for his Porsche and SEAT models. While Smyth refused to disclose the price it is believed to have sold for around €1.5m.

An investor is also believed to have paid around €1.1 m. for a 1.07 acre property at Herberton Road, Rialto, Dublin 12. The Ford showroom premises extends to 1,159 sq m. and it is let to Canalford Ltd. on a 10 year lease from September 2011 with a current rent of €80,000 a year. DTZ were also the agents on this.

An interesting test of the market will be a portfolio of four Dublin motor properties which receivers Kavanagh Fennell have just launched on the market through Lambert Smith Hampton for sale in individual lots.

The most valuable of these is a 1,044 sq m showroom on a 1.1 acre site at Longmile Road, Dublin 12 for which LSH are guiding €1.7m. The property is let to Frank Keane Motors (Volkswagen Dealer) at €170,000 per annum. The dealer will be moving at the end of 2014 to the Liffey Valley showroom which they recently purchased. A vacant showroom, 6 Motor Centre, Tallaght Dublin 24 has a €295,000 guide price. As well as showroom fronting the N81 Tallaght bypass, the 234 sq m triangular property comes with a warehouse to the side. LSH are asking €475,000 for 1C Avonbeg Industrial Estate, Longmile Road, Dublin 12, which comprises a terraced warehouse/showroom and the entire comprises 765 sq m.

While the fourth motor property has the cheapest price at €275,000 its tenant has the longest term left on its lease. Located at 121 Drimnagh Road, also in Dublin 12, it comprises a single storey showroom/workshop premises together with a forecourt and enclosed open area to the rear. The tenant Budget Auto Ltd has two years and seven months to run on its lease which dates from May 2012 at a current rent of €30,000 a year.

Allsop Space has also sold three showrooms in the last eight months. The most valuable of these was a former Saab showroom at Lower Glanmire Road in Cork City which sold for €405,500. Extending to 578 sq m, the price works out at €700 per sq. m

Two weeks ago it sold an even larger one at Lough Sheever Corporate Park, Mullingar, Co Westmeath for €335,000. With its showroom, offices, and service area extending to 1,432 sq m.

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