FOUR Dublin-based businessmen have paid £6.7 million for a large retail investment involving Roches Stores at The Square in Tallaght, west Dublin. The investment will provide a tax shelter on top of a yield of 7.5 per cent.
About half a dozen groups tendered for the store, most of them companies looking for tax-efficient investments. Palmer McCormack had been quoting a guideline price of £6.5 million but in the event did even better because of the high level of interest in the property.
The consortium which bought the investment estimates that the yield will end up at above 9 per cent once the tax breaks are taken into account.
In financial terms, the new owners can claim total tax allowances of £4.125 million because the vendors, Scottish Provident, were not in a position to avail of them. These will be available at the rate of £217,000 per annum over the next 19 years.
The consortium can also look forward in the future to a growth in rents which currently stand at £9.50 per square foot. Roches is one of the anchor tenants in The Square, where it operates a 57,000-square-foot department store on the main floor. Last year, the rent was increased from £456,000 to £545,581, representing a 3.5 per cent per annum compound uplift in the commencing rent.
Roches Stores was one of three investments bought last year by Scottish Provident for more than £13 million. The main element of the portfolio was the Frascati Shopping Centre at Blackrock, Co Dublin. Also included was a department store at the Nutgrove Shopping Centre, Rathfarnham, Co Dublin.
When the portfolio was acquired by Scottish Provident, it was producing a rental income of £1,355 356 Roches pays an annual rent of £480,000 for its supermarket and department store at Frascati. A further 14 shops in the complex, which includes a McDonalds fast-food restaurant, produce an additional £340,000
The high level of interest in Roches Stores underlines the growth in demand for designated area investments by companies and private investors seeking tax shelters. With the current tax year ending next month, there are few qualifying investments available and those currently on the market are fetching top prices.
Nigel Kingston of Douglas Newman Good, who has handled a range of investment sales in Dublin's Temple Bar area, says yields there have generally varied between 7 and 8 per cent and in a number or cases, where there were high capital allowances, the yield went below 7 per cent.
Last week, the agency secured £370,000 for Planet Web, a 1,000-square-foot restaurant at The Cobbles in East Essex Street, which is rented at £30,000 per annum. The return in this case will be 7.4 per cent. Two weeks ago, Temple Bar Properties secured £500,000 for a retail investment at 50/51 Dame Street, in a deal that will produce a net yield of 7 per cent.
