The Tommy Hilfiger shop on Grafton Street was first offered for sale last year at €30 million, writes JACK FAGAN.
THE RELATIVELY new Tommy Hilfiger store on Dublin’s Grafton Street looks set to be sold to an overseas fund in what will be the first significant sale of a retail investment this year.
The unnamed buyer has agreed to purchase the high street property for a figure in the region of €23 million. At that value, the yield would be around 6.7 per cent. Tommy Hilfiger is to continue trading from the store.
Overseas buyers have, by and large, stayed out of the Irish commercial property investment market for many years because of the perception that it was overvalued.
That judgement proved accurate in 2008 when capital values on Grafton Street fell by an unprecedented 49.8 per cent, according to London-based researcher Investment Property Database (IPD). The decline in Henry Street and Mary Street was of a similar magnitude.
Investment advisers now expect that, following the repricing of prime properties, more overseas buyers seem likely to dip into the relatively small Irish market if it continues to offer returns comparable to those generally available in London and other UK cities.
Colm Luddy of CB Richard Ellis, who is handling the sale of the Tommy Hilfiger property, said yesterday that he was precluded from making any comment until a sale had been completed.
He confirmed that several Irish parties had expressed interest in the investment and made offers for it.
When the property was first offered for sale last November, the agent had sought around €30 million for it. At that price it would have shown a return of 5.25 per cent, easily the highest yield available on the street for many years.
However, sentiment in the investment and retail markets has worsened considerably since last November because of falling capital values, the scarcity of debt financing and the increasing demand for rent reductions by tenants affected by the fall-off in consumer spending.
The fact that a sale of the Tommy Hilfiger store has been agreed at a yield of something short of 7 per cent underlines the huge changes that have taken place in the investment market over the past 18 months. At the height of the boom in September 2007, the River Island store and the adjoining Wallis outlet on the opposite side of Grafton Street were sold at €115 million. The yield was a mere 2.4 per cent.
Tommy Hilfiger is paying a particularly strong rent of €1.672 million for its Grafton Street store which has 557sq m (6,000sq ft) of retail space at ground, first and second floor levels. There is a further 325sq m (3,500sq ft) of ancillary space. The shop continues to trade strongly.
The Zone A rent works out at around €1,000 per sq m (€93 per sq ft), somewhat ahead of the €890 per sq m (€82.70 per sq ft) agreed last year for another building on Grafton Street.
Tommy Hilfiger apparently outbid fashion retailer Massimo Dutti (a sister company of Zara) for the Dublin store which is being sold on behalf of Marks Spencer. It plans to use the proceeds of the sale to roll out more outlets in Ireland.
