Royal Liver Assurance is planning to offload 16 investment properties, most of them shops, in the centre of Dublin

GREEN PROPERTY Company looks set become a major landlord in Dublin city centre following the opening of talks to acquire Royal Liver Assurance company’s entire Irish portfolio of 16 properties which are likely to be valued at around €120 million.

If the “exclusive discussions” with Green prove successful, it will be the largest property transaction since Bank of Ireland and AIB sold several portfolios of bank branches in 2006 and 2007.

Commercial property values have since fallen by around 59 per cent and with Royal Liver anxious to exit the Irish property market, Green Property’s managing director, Pat Gunne, will have to decide before Christmas whether or not to buy all 16 investment properties. Green has substantial property interests in Ireland and Britain and is owner of the successful Blanchardstown Town Centre in west Dublin.

The 16 properties on offer include 15 retail units including McDonald’s fast food outlet and four other shops on Grafton Street, Hodges Figgis and Waterstones on Dawson Street, three shops on Henry Street, another one on Lower O’Connell Street, the 02 store on Patrick Street in Cork and the landmark Ballast office on Dublin’s O’Connell Bridge.

Only a week ago Royal Liver sold the freehold of the Cafe en Seine superpub on Dawson Street to Louis Fitzgerald, owner of the largest pub chain in Ireland, for slightly over €8 million.

The decision by Royal Liver to offload its entire investment portfolio will not come as a major surprise as it put seven of its best properties on the market in June, 2009. Offers were received for most of them but the company refused to sell in the belief that they would secure higher prices. However, capital values have since fallen by a further 17.7 per cent, according to the Jones Lang LaSalle property index but the rate of decline in values and rents over the last three months has been slower than in previous quarters this year.

Turnover in the property investment market has been particularly sluggish this year at only €117 million because of the scarcity of bank funding and the perception that values are still falling. The sale of the Royal Liver portfolio might well persuade more investors to reenter the market, according to investment specialists.

Caroline McCarthy of CB Richard Ellis, who is advising Royal Liver, said it was rarely that such “a meaningful portfolio of prime city assets” is offered for sale.

The McDonald’s fast food restaurant at 9-11 Grafton Street is currently producing rents of around €1.4 million but with the lease running out next year and a new ban on upwards-only rent reviews, a rent reduction is clearly on the cards. Nevertheless McDonald’s seem certain to renew the lease because the existing planning permission allows it to trade 24 hours a day. McDonald’s contributes €1.15 million to the rent while Foot Locker paid a rent of €450,000 until it closed down earlier this year. Numbers 9 to 11 also includes shops let to Office shoes and Health Matters. McDonalds is likely to be valued around €20 million, reflecting a yield of 6.5 per cent.

Royal Liver may seek around €14 million for Clark’s at 85/86 Grafton Street, which is rented at €980,000 per annum. However, the lease is due to run out next year.

Hodges Figgis pay a rent of €550,000 for their building at 56-58 Dawson Street. The lease has another five or six years to run. Investors would expect to get a yield of around 7.5 per cent on the investment which would suggest a valuation of around €7.5 million.

Royal Liver is probably expecting in the region of €6 million for Waterstones at 6/7 Dawson Street which is rented at €450,000.

Over in Henry Street, the Vodafone shop is rented at €335,000 and will probably sell for €4.4 million-the equivalent of 6.5 per cent. Next door the 02 shop produces €290,000 in rent and could make about €4.4 million.

The 02 shop at GPO Buildings is rented at €350,000 and is valued at about €5.3 mlllion-giving a 6 per cent return.

Number 2-4 Merrion Row is producing a rent of €725,000 from the Spar shop as well as overhead offices rented to the Office of Pubic Works. The overall valuation is probably around €8.9 million

At Liffey Valley, a multi-let office block of 5,574 sq m (60,000 sq ft) has a rent roll of €1.25 million and a value of €14.4 million, based on a return of 8 per cent.

Back in the city centre, Clarkes shoe shop on Lower O’Connell Street is rented at €455,000 until next year and at a yield of 7.5 per cent would have a value of €5.5 million.

Other properties are a 1,858 sq m (20,000 sq ft:) office building in 22/25 Clare Street rented to the OPW at €670,000 (possibly worth €7.7 million); the Ballast Office shops and office on O’Connell Bridge rented at €1.17 and likely to be valued at €13.5 million (8 per cent yield); 02 shop at Patrick Street, Cork, rented at €328,000 until 2014 and valued at about €4.3 million (7 per cent yield); building at Eastgate Business Park in Cork rented to Tyco at €389,000 and possibly worth €4.4 million (8 per cent yield) and a block at Blanchardstown Corporate Park producing €1,050,000 and valued at €10 million (9 per cent yield).