The high profile shop is being bought by a German bank and, now there’s value on offer, several other German funds are looking at opportunities here
THE LEADING German banking group DekaBank has agreed purchase terms for the Tommy Hilfiger store on Dublin’s Grafton Street. The bank is paying in the region of €25 million for the investment which will provide a return of about 6.5 per cent. It is the largest and most important sale in the commercial market this year.
The same bank bought the Mahon shopping centre in Cork more than eight years ago for over €250 million.
DekaBank’s reappearance in the Irish market comes at a time when several other German funds are also looking at investment opportunities in Dublin, something they have not done for over a decade because of the perception that properties here were overvalued.
However, capital values have declined quite dramatically over the past two years, falling by 59.9 per cent on Grafton Street and by 58.3 per cent on both Henry Street and Mary Street, according to the London researcher IPD.
The wider retail market has seen values fall by 53.2 per cent during the two-year peak-to-trough period up to the end of June 2009.
DekaBank is one of the largest asset managers in Germany with funds of over €160 billion. It is obviously in a position to acquire more Dublin properties.
A number of cash-rich Irish investors are also looking for investment opportunities on the high streets. In all cases they are seeking out good buildings with long leases and a secure income.
Colm Luddy of agent CB Richard Ellis, who is handling the sale of Tommy Hilfiger for owners Marks Spencer, said he was not in a position to make any comment at this stage.
MS developed the fashion store on the site of the former Grafton Arcade. It initially sought €30 million for the property last November offering investors a yield of 5.25 per cent but gradually dropped the asking price because of the slowdown in the investment market and the shortage of bank debt.
Tommy Hilfiger is paying a rent of €1,672,000 for the 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 Zone A rent works out at around €1,000 per sq m (€93 per sq ft), well ahead of the €890 per sq m (€82.7 per sq ft) subsequently agreed for another building on the street. Rents are expected to fall on the street over the coming year with one level for the main stores and a much lower rate for smaller shops.
The Tommy Hilfiger store was apparently first offered to New York jewellers Tiffany but it turned the shop down because of the high rent. It is now trading in Brown Thomas on the opposite side of the street.
Tommy Hilfiger was eventually chosen after outbidding another fashion retailer, Massimo Dutti, a sister company of Zara.
