Sunday 15 September 2019

Waterford City portfolio at €2.3m offers buyer yields of up to 12.2pc

Downtown: The Waterford portfolio includes 4/5 Michael Street (pictured) in Waterford City
Main Street Tramore
Donal Buckley

Donal Buckley

A portfolio of Waterford properties, five of them in the city centre, will go for public auction as six separate lots on November 29. Auctioneer Sherry FitzGerald John Rohan estimates that their combined guide prices total €2.3m. They are being sold by the executor of the estate of the late John McGrath, who had been engaged in business in the UK.

The most valuable of the lots is on Michael Street, the city's main shopping destination and a street which is about to see construction of a major new €58m development including a shopping centre and multi-storey car park.

The auction lot, 4/5 Michael St, is for a 1,180 sq m (12,700 sq ft) four-storey terraced property with a €950,000 price tag. It is let to Poundland Ltd, trading as Dealz retail store, on a 10-year lease which commenced in November 2012, at a passing annual current rent of €108,000. This suggests a gross initial yield of 11.37pc.

The premises is also located opposite Dunnes Stores on the pedestrianised main shopping area of the city centre and close to two shopping centres, Georges Court about 200 metres north-east of the lot, and City Square Shopping Centre which is located about 90 metres south-east of the lot.

The Michael St lot has a ground floor extending to 500 sq m (5,382 sq ft), a first floor of 400 sq m (4,305 sq ft) and the two upper floors have 140 sq m (1,507 sq ft) each. It also benefits from rear access for deliveries.

Nearby, a second lot combines 54 John St and behind it Unit 1 Parnell Court and these have a combined AMV of €380,000. The John St portion of this lot is a three-storey terraced premises which generates €40,000 in annual rent, while 1 Parnell Court comprises a retail unit which generates €121.76 per week suggesting a gross initial yield of 12.2pc.

Both are let to Bodega Restaurant which serves seafood, Mediterranean and Irish cuisine and which was rated 4.5 out of 5 in recent Trip Advisor reviews. The restaurant and kitchen are located on the 120 sq m (1,292 sq ft) ground floor. The two overhead floors have a separate entrance and each extends to 41 sq m (441 sq ft) and are used as an office, staff canteen and storage. The other part of this lot at 1 Parnell Court extends to 12 sq m (129 sq ft), and Bodega currently uses it as a store. Parnell Court is a small retail complex.

Nearby at 52 John St, a three-storey terraced property extending to 62 sq m (667 sq ft) is vacant. It had been occupied by a barber shop with a one-bedroom apartment overhead. It also has a small rear yard. Also on John St, the back room of a shop at 55 John St, which is let to Eyeworks opticians, extends to 10 sq m (108 sq ft). It can be accessed only through the shop and has a €30,000 AMV.

John Street, which is almost like an extension of Michael Street, is the city's main night spot with late-night bars and restaurants. For instance, in between numbers 52 and 54, is number 53 John St which is occupied by Burzza Restaurant which is not included in the auction and has no connection with the portfolio.

Also in the city centre, 68 O'Connell Street, a mid-terrace property divided into four apartments, has an AMV of €180,000. The units comprise a one-bedroom apartment and three two-bedroom apartments. One of the two beds is vacant while the others generate total rents of €21,600 per year. If fully let, they could have the potential to generate more than €27,000 a year in rental income, suggesting a gross yield of 15pc.

O'Connell Street is the first street back from the city's south quays to which it runs practically parallel and it is close to Bridge Street, Thomas Street and The Glen. Nearby occupiers include The Bridge Hotel, Fitzwilton Hotel, Aldi, and Waterford Institute of Technology (WIT) School of Architecture.

All of these properties are located within the regeneration area where some buildings built before 1915 may qualify for 'Living in the City Initiative Tax' incentives. However, demand for rental properties is sufficiently strong that landlords may not consider it worth their while to waste time and money regenerating properties which could be earning rent.

The sixth lot in the auction is on the Main Street, in the seaside town of Tramore, Co Waterford and it has a €650,000 guide price. Extending to 517 sq m (5,565 sq ft), its ground floor and part of its second floor is leased to Boots Retail Ireland Ltd for €61,860 per annum on a 25-year lease, with a 15-year break clause which commenced in May 2008.

Its first floor is leased to Manguard Plus incorporating CCS and Pro Secure for €10,000 per annum on a five-year lease which commenced in August 2017. This suggests a gross initial yield of 11.06pc. As well as the ground-floor door to Boots Pharmacy, a second ground-floor door offers separate access to a lift which accesses all floors.

The first floor extends to 176.16 sq m (1,894 sq ft) and accommodates modern, office space with reception, training room, four offices, staff canteen, filing room, store/utility room and two toilets. A small covered deck area adjoins it. A self-contained office is also located on this floor.

Boots' lease also includes part of the second floor and accommodates offices, stock room, canteen, shower room, wc and comms room. A small outdoor deck area is also located at this level.

The Michael Street area of Waterford City is expected to see construction begin next year on a major new shopping centre and multi-storey car park in a development involving both Nama and the Saudi Arabian Alhokair family.

Last week, Construction Information Services (CIS) reported the appointment of Tony Kirwan Plant Hire & Civil Engineering to undertake demolition of disused buildings as part of clearance work on a section of the site.

The new shopping centre, which will be accessed from Michael Street, will extend to 10,030 sq m (107,962 sq ft) with 16 units including an anchor store as well as a 635 sq m (6,835 sq ft) cafe/restaurant area. A Nama spokesperson declined to comment on the State agency's role as to whether it is the landlord, joint-venture partner, vendor of the site, or whether it intends to license the property to the development company.

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