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Institutions to pay €240m for stake in Swords Centre

{con_title} September 06 2006

Two of the country’s largest institutional investors are to have a major stake in The Pavilions Shopping Centre at Swords, Co Dublin, when property developer Joe O’Reilly completes the purchase of the complex shortly for €575 million.

Irish Life and Irish Property Unit Trust are apparently to pay around €240 million for a substantial interest in the shopping centre and in a large extension which is now almost complete.

The two funds will also have options to buy into a third phase which is expected to include a town centre and additional shopping to bring it into line with Dundrum Town Centre.

The investment by the two institutions, which has yet to be formally completed, will show an initial return of 3 per cent and an equivalent yield of over 4 per cent. The decision of the two big funds to share ownership with Mr O’Reilly is seen as a strong vote of confidence in the developer who handled the development and letting of Dundurm Town Centre, now the country’s largest shopping precinct with a value of over €1 billion.

Mr O’Reilly is also leading the redevelopment of the ILac shopping centre after buying a 50 per cent stake in it from British Land.

He eventually hopes to link it up with O’Connell Street through the redevelopment of the old Carlton cinema site, Mr O’Reilly outbid seven other investment groups for The Pavilions which was put on the market by the Eircom Superannuation Fund. Selling agent Druker Fanning & Partners explained that the sale was triggered by the need to rebalance the pension fund’s portfolio.

The first phase of The Pavilions, with 65 shops and restaurants, is producing rents of €8 million. That figure is expected to increase substantially once the first rent reviews get under way in the coming weeks.

The rents quoted for the second phase of the centre - covering a multiplex cinema, 20 further shops and restaurants, as well as civic facilities - are expected to add a further €5 million in rental income. By the time the rent reviews are completed later this year, the overall rent roll is likely to be well in excess of €17 million.

The end value of The Pavilions will be largely determined by the planning permission eventually granted for a high profile 5.2 acre site adjoining the centre.

Its town centre zoning suggests that the planners would like to see the new owners provide a range of retail, office, residential and civic facilities similar to what Mr O’Reilly has provided at Dundrum.

Bannon Commercial is believed to be advising Mr O’Reilly while the two funds are being represented by Denise Turner of Hamilton Osborne King.