Liffey Valley boss says centre is fighting fit after €630m takeover by Germany's BVK
Interview: Denis O'Connell, Centre Director, Liffey Valley SC
Denis O’Connell has been with Liffey Valley Shopping Centre since it was a plan on paper. He’s seen the highs of the boom and depths of the recession - when many retailers struggled just to make the rent. But he tells John Mulligan that despite a generally tough Christmas, the centre has been doing well, helped by a huge new Penneys store.
It's hard to imagine global mixed martial arts star Conor McGregor wandering about the Liffey Valley shopping centre and plonking himself down to have a coffee at Costa.
"You'd see him in Nando's sometimes, having a bite to eat with his friends," says Denis O'Connell, the director of the west Dublin shopping venue.
McGregor's parents live in nearby Lucan. O'Connell says that when McGregor became really famous, he'd always take time out to let kids take selfies with him.
"I haven't seen him here in about six months though," says O'Connell, sounding a bit disappointed.
Maybe he could take on McGregor as a brand ambassador?
O'Connell isn't too sure about that idea. At any rate, the time is past. McGregor might have been got for a steal a few years ago. Now he would break the bank.
O'Connell (48) has been working at the Liffey Valley centre - the third-biggest in the country after Dundrum and Blanchardstown, also both in the capital - since before it opened in 1998, he was brought on board as construction got under way. Within 18 months or so of it opening its doors, he became the centre director - a role he's had ever since.
Controversy hung over the centre's early years. The original planning for the site was the subject of intense interest at the Mahon Tribunal.
As we sat down to talk, news had just filtered through that Owen O'Callaghan - the original developer of Liffey Valley - had died the night before.
Today, with about 100 outlets and footfall of 8.6 million last year, the centre is owned by Germany's largest public pensions group, Bayersche Versorgungskammer (BVK), for €630m, who bought the property last year.
It was sold by one of the original developers, Grosvenor, as well as US property giant Hines and a unit of HSBC. Hines and the HSBC unit had acquired a combined 73pc stake in Liffey Valley in 2014 from Aviva Investors for €250m, making for a stellar return on their investment.
The centre had been put up for sale in 2011 for €350m, but had failed to sell. A sale was close at the time, says O'Connell, but just couldn't get past the post.
But they were dark times. The country was enduring a financial, social and economic implosion.
O'Connell almost shudders when he recalls it.
"The world crashed in 2008, but it didn't really filter through here until about 2010 or 2011," the Tullamore man says. "Our numbers (of visitors) dropped, albeit by small amounts - by 2.5pc or 3pc each year. But the spend got hit, particularly at premium outlets."
Men's fashion was worst hit.
O'Connell says concessions - on rents, in particular - were given, but only where retailers were prepared to let Liffey Valley management to see their accounts, and also what remedial action the retailers had taken themselves to stem declines. "We wanted to see audited accounts, cash flows, and business plans for the next three years," he says. "Some objected strongly to showing us their accounts, so we couldn't make arbitrary decisions on rents in their cases."
The recession also saw the advent of new leases, with a 2009 act having banned any new upward-only rent reviews in leases. About 17pc of tenants at Liffey Valley are on such new leases and that first batch is now coming up for rent review. Most will probably face single-digit percentage increases.
Liffey Valley's annual rent roll is between €30m and €35m. It had been closer to €40m during the boom. The centre - with a catchment of about 1.7 million people within a 30-minute drive - is anchored by Marks & Spencer and Dunnes Stores, with most of the usual suspects renting the other units. Liffey Valley is also home to the busiest cinema complex in the country - the 14-screen Vue.
"The best thing to come out of the recession in my view - it may sound like a cliche - is that there's a lot more of a partnership approach between landlords and tenants, certainly here," O'Connell says.
Interestingly, he says that while men's fashion was worst hit during the recession, sales of formal wear have picked up since the recovery began.
"Sales of men's formal wear - business suits - has picked up faster than casual wear," he says. "There's a Conor McGregor factor in there somewhere. Come back here in three weeks' time when shopping for Confirmation kicks off. Kids are looking for three-piece tweed suits and dickie bows. It's hilarious."
According to the latest available data from the Central Statistics Office (CSO), the value of retail sales, excluding motor sales, rose 1.8pc in November, and 2.2pc on an annual basis.
The volume of retail sales, excluding motors, was up 0.6pc and 2.1pc respectively on that basis.
Industry group Retail Excellence Ireland sounded warnings just a couple of days before Christmas that the festive season had been "challenging" and on par with 2015.
Online sales had soared as shoppers took advantage of weak sterling, while telecoms, ladieswear, jewellery and footwear sales were "significantly down", it said.
O'Connell, who worked in his father's pharmacy as a youngster in Tullamore, says he would track REI's assessment before the CSO's, because REI is closer to retailers on the ground.
But despite REI's gloomy report, O'Connell says that Christmas trading at Liffey Valley was pretty good, with a "very strong end" to the year. Footfall to the centre in December touched just under 1.4 million - a 16pc increase on December 2015.
Its sales of giftcards (a card that can be used in any store in the centre), jumped 17pc in December to €1.6m. Full-year sales of those giftcards were up about 13pc, at €3m.
"Things were tough coming into the last quarter," he says, with things "improving slowly".
He blames higher rents and soaring new car sales for having "sucked the money" out of retail.
New car sales hit their highest level in eight years in 2016, rising 17.4p on 2015 to 146,385.
Residential rents rose by almost 4pc in the third quarter of 2016, according to most recent report from Daft, making for an 11.7pc annual rate of rent inflation across the country - the highest recorded by Daft since it began compiling rent reports in 2002.
"Rent increases are taking disposable income away from retail," he says.
"Within our catchment area rents have increased and there's been virtually no housebuilding. So, people who are renting have no option but to pay more. Something has to give.
"The increase in new car sales - with PCPs (Personal Contract Plans) that are attractive - also takes away disposable income that might have historically been spent in places like this," he adds.
But one of the things that has given Liffey Valley a huge boost is its first Penneys store (the chain is owned by UK-listed firm Associated British Foods, and trades as Primark outside Ireland).
Incredibly, the opening in early December of the massive outlet (with 54,000 sq ft of retail space) was the second-busiest opening of any Primark store ever, beaten only by the 2015 opening of the Grand Via Madrid outlet in Spain.
It's hard to believe that Irish people - with 36 other Penneys outlets already in the country - flocked en masse to the new Liffey Valley shop on a Tuesday morning. O'Connell won't say how much rent Penneys is paying, but industry insiders reckon it's probably as high as €1.6m or €1.7m a year.
"The Penneys effect was massive for us," says O'Connell, a former hotelier whose wife, Ingrid Ryan, is the centre manager of the Whitewater shopping centre in Newbridge, Co Kildare (in 2015, she was named All-Ireland Manager of the Year at the prestigious Spectre Awards in London).
"We knew it would bring a significant uplift in footfall to the scheme as a whole, but we didn't anticipate the numbers," he adds.
The Penneys outlet had 18,000 visitors on its opening day, and the centre itself attracted an extra 10,500 shoppers, making for 28,000 that day.
"And it has continued. The first week they opened, we were up 34pc. As December passed, we were still showing 16pc, 17pc or 19pc of an uplift. It's been the same in January." One of the reasons it took Penneys so long to arrive at Liffey Valley was the lack of a large space that it could take on. Liffey Valley spent €26m on an upgrade that involved a reconfiguration of the cinema and other works that gave Penneys the kind of space it wanted.
Liffey Valley also has plans for a €150m extension that would increase the size of the centre by about 50pc. It will also see the construction of an Olympic-sized ice-rink and viewing area.
That would give it the opportunity to attract retailers it doesn't have and which want large spaces like those Penneys has. Spain's Inditex, the owner of Zara, is one of those that O'Connell would like to see with a store in Liffey Valley.
Meanwhile, O'Connell says he hasn't yet met with the new owners of the centre. The investment by BVK's acquisition was made on its behalf by its investment manager, Universal Investment. Hines is continuing to act as asset and development manager for Liffey Valley.
Maybe if the new owners cause any trouble he can just give Conor McGregor a call.