Shopping Centre Sale: The purchase of a shopping centre in Swords is the most significant property deal ever done in Ireland. Jack Fagan reports on the sale of The Pavilions
Leading property developer Joe O'Reilly yesterday strengthened his hold on the Dublin shopping centre market when he bought The Pavilions in Swords for over €575 million. It is the largest and most significant property investment ever to have been completed in Ireland.
The purchase means that by next year, Mr O'Reilly will have retail investments in Dublin worth close to €2 billion - Dundrum Town Centre, the Ilac Centre, The Pavilions and a new shopping complex shortly to be developed at the side of the St Stephen's Green Shopping Centre on South King Street.
There was aggressive tendering for The Pavilions with seven other investment groups pitching against Mr O'Reilly for the five-year-old centre and an adjoining development site of 5.2 acres. Mr Neil Bannon of Bannon Commercial, who acted for the purchaser, said the acquisition underlined his client's faith in the top end of the retail market.
Irwin Druker of Druker Fanning & Partners advised the Eircom Superannuation Fund which had pre-funded the shopping centre in 1999.
Mr O'Reilly's company Castlethorn Developments (John Fitzsimons and Liam Maye are also shareholders) built Dundrum Town Centre, which has a current value of over €1 billion. The company is shortly to embark on a substantial extension which will be concentrated on the old shopping centre in the village.
Separately Mr O'Reilly bought a 50 per cent stake in the Ilac Centre as a personal investment for €125 million and is currently upgrading and enlarging it with the intention of eventually linking it up with O'Connell Street through the redevelopment of the old Carlton cinema site.
Yesterday's purchase of The Pavilions will also allow Mr O'Reilly to enhance its value through the development of a further 5.2 acres which adjoin the shopping centre and have major town centre zoning.
Apart from its involvement in the retail market, Castlethorn is also the lead developer in Adams-town, a new town being built on 500 acres near Lucan in west Dublin.
It is also developing a top class hotel and country club at Killeen Castle in Co Meath.
The first phase of The Pavilions, with 65 shops and restaurants, is producing rents of €8 million. That figure is due to increase substantially once the first rent reviews get under way shortly. Quoting rents for the second phase of the centre - covering a multiplex cinema, 20 further shops and restaurants along with civic facilities, due to open for business next October - will equate to a further €5 million in rental income.
The expectation is that the overall rent roll should top €17 million by this autumn.
The unknown element in the deal is the development site, which has the potential to provide at least another 92,903sq m (1 million sq ft) of shopping, offices and residential buildings.
The Pavilions stands on a site of 24 acres and if Mr O'Reilly decides to replace the extensive surface car park with more multi-storey or basement car parking and develop further, the overall development value could well hit the €1 billion mark.
With the value of the 5.2 acres thought to be worth at least €100 million to the new owner and the rent roll likely to reach at least €17 million, the yield is likely to be around 3.25 per cent - easily the lowest for a major shopping centre in Ireland.
The centre is trading exceptionally well because of the rapid growth in the population of Swords and north Dublin generally in recent years. The centre is anchored by Dunnes Stores, Superquinn, TK Maxx and Argos.
