ShoppingCentres: British Land's decision to sell the Ilac centre signals its departure, writes Jack Fagan

The decision by British Land to sell its 50 per cent stake in Dublin's Ilac shopping centre signals its departure from the Irish property market where it has been a key player for several decades.

The British plc has completed contracts to dispose of its stake to property developer Joe O'Reilly for €125 million unless its partner in the shopping centre, Irish Life, exercises its option to pay the same price and regains full ownership of the centre.

Sources close to Irish Life suggested this week that the company might be tempted to buy in the 50 per cent stake and offer it for sale on the open market in the hope of fetching a higher price.

However, the reality is that Irish Life struggled for years to reduce its interests in the centre - for a long time it represented about 40 per cent of its entire property portfolio - and paid dearly to swap a half share for 73 per cent of the equity in the St Stephen's Green centre. It took a whopping €89 million in cash to clinch the deal.

After such a costly experience, it seems extremely unlikely that, even though Irish Life's property investments have grown substantially in recent years, it will not want to be boxed in with a 100 per cent stake in the Ilac and still have €40 million to spend on an upgrade and remodelling programme.

If, as expected, British Land's stake passes to O'Reilly, then observers will be watching closely to see whether he also takes over responsibility as equity manager to drive the redevelopment.

Irish Life was an extremely poor manager of the Ilac over the years and allowed it to fall into its present rundown condition. And when it decided to embark on a major upgrade at least seven or eight years ago, it unveiled its plans before reaching agreement with Dunnes Stores on relocating some of its operations.

Without Dunnes on board, the overall plan could not proceed. The breakthrough came years later courtesy of British Land after they assumed overall responsibility for the centre and got approval for a modified redevelopment plan.

O'Reilly's undoubted success in developing Dundrum Town Centre into a €1 billion-plus investment has shown that he has the skill and flair to transform the Ilac into a top performing shopping complex.

Its location in the busy Henry Street/Moore Street area means it has a large captive audience and, with O'Reilly possibly in a position to link it up with O'Connell Street through the redevelopment of the old Carlton cinema site, then he is already in a stronger position than Irish Life.

Anyone keeping a close eye on the UK commercial property market will not have been surprised by British Land's decision to cash in its chips in Dublin.

The company has just agreed to take over Pillar Properties for €1.2 billion (£811 million) and, to fund the deal, it will obviously have to sell off some of its peripheral investments.

British Land played a central role in the development of the International Financial Services Centre, the largest project of its kind in this country which greatly helped to change the business climate in Dublin.

Along with Hardwicke, it built and sold 120,774sq m (1.3 million sq ft) in the docklands site, including 69,677sq m (750,000sq ft) of offices, 333 apartments, a hotel and a 400-space car-park.

Even before that, the UK company and Hardwicke also built the huge Setanta Centre off Nassau Street which, under different ownership, has soared in value over the years.

It later developed the St Stephen's Green Shopping Centre and, after selling a 73 per cent stake in it to Irish Life, disposed of the remaining interests to businessman Pierce Moloney for €64 million.

It also owned The Swan shopping centre in Rathmines for nine years, selling it towards the end of 1999 to Paul Anderson's Omniplex Holdings for €16.5 million after failing to turn it around.

Its other Irish interests, which have also been sold, included a shareholding in Cherrywood Business Park and two office buildings, Merrion Hall and Abbey House.

British Land's successful operations in Dublin over three decades were due almost entirely to its Irish director of operations, Cyril Metliss, who is recognised as one of the most astute property developers in these islands. He relied heavily over the years on the advice of John Mulcahy, now managing director of Jones Lang LaSalle, who remains one of the main players in the Irish property market. It was a formidable partnership that achieved much.