“M50 Mall Sales Amid €600m Dundrum Loans”

More than ten years ago, Sean Mulryan, a software developer, found himself conversing with his daughter’s friends during her birthday party about online shopping. Most of their outfits had been bought online, he discovered.

Being a Roscommon native, Mulryan took that opportunity to make a business decision. He decided to put his owned shopping centres up for sale, with the intention of generating finances to escape the National Asset Management Agency (Nama).

In the concluding months of 2014, Ballymore Group, belonging to Mulryan, parted with a shopping complex in Berlin that it had possessed for seven years. The same year, the group discharged a sizable shopping mall-to-residential development it had established on the Danube’s banks in Bratislava, reportedly earning €360 million for it.

Fast forward to 2016, Mulryan sold the Whitewater Shopping Centre in Newbridge, Co Kildare. It was a venture that he had launched in 2006 and in which he held a 50 per cent stake. The centre switched hands to Germany’s Deka Immobilien who bought it for €180 million.

That would be the pinnacle of Irish retail property transactions that year, with around €2.25 billion of assets exchanged. The flow was largely fueled by foreign investment attracted to what was considered the most lucrative sector of the commercial real-estate market at the time. Notably, it involved major players like US private equity titan Blackstone, who invested €950 million in the Blanchardstown Centre outside the M50 motorway, as well as German pension group Bayerische Versorgungskammer, which spent €630 million on the Liffey Valley Shopping Centre and neighbouring development land.

However, even Mulryan’s foresight could not predict the ensuing impact of the Covid-19 pandemic, which precipitated the growth of e-commerce and the subsequent global increase in interest rates resulting in the depreciation of commercial property values.

According to CBRE, prime shopping centres along the M50 have experienced a 30 per cent increase in rental yields, going from 6.5 per cent to 8.5 per cent due to a decline in their values over the past two years. The downward trend in property prices contrasts with the increasing yields.

Despite the challenging sector conditions, deal-making activity has resumed, albeit prompted by necessity rather than opportunity. Eagle Street Partners, established by former high-ranking executives from Glenveagh Properties, has emerged as the selected bidder for the Square Town Centre in Tallaght. The retail landmark went into receivership almost two months ago when the loans towards the centre exceeded its worth.

My co-worker, Ronald Quinlan, discovered that the bid was pegged at €126 million. As a consequence, AIB, which is due €140 million and appointed the receivers in May after earlier sale attempts failed, will face a write-down on the repayment. M&G, a UK financial institution with a minor lender position, will forfeit its entire investment.

Initially, the Square was priced as high as €170 million by its owner, Oaktree, a Texan investment company which acquired 90 per cent of the centre for €250 million five years earlier, greatly below its peak value of €640 million in 2007.

In other news, this paper reported that the US Strategic Value Partners (SVP) has tendered a bid of up to €600 million for the Blanchardstown Centre. This would mark its third ownership change in eight years. Goldman Sachs, a financial supporter of Blackstone’s investment in the complex in 2016, took over the largest mall in the State at the outset of the 2020 pandemic by exchanging debt for equity. The centre’s valuation stood at €750 million, and the process was spurred by a sharp downturn in rental income following the closure of Debenhams, one of its previous key tenants.

More than a year ago, a significant player in Wall Street banking resumed marketing, aiming at €650 million-€725 million. However, preceding the involvement of the SVP, highest bids had merely reached approximately €580 million. Its proposition would enable prime lender Morgan Stanley to recover their loans, though subordinate lenders could potentially face losses. Previously one of the inferior lenders, AIB recently opted to sell its offerings worth €175 million to a credit fund in London, at a discount rate of 22 per cent.
[Deputy governor of Central Bank expresses concerns over the extended timeframe needed for relief in commercial property mattersOpens in new window]
Following the pandemic, there has been a significant rise in footfall and rental revenue. Current occupancy proportions in the M50 centres are as high as about 94 per cent, while prime Dublin streets show 89 per cent, and the country’s retail parks boast nearly full occupancy, as reported by Bannon property consultants.
Colm Lauder, a strategic advisor for Lingard Capital dealing with some of Europe’s most prominent retail investors and a former property market analyst, expressed optimism for the market. He stated it has already hit its lowest point and has recently undergone extensive restructure, with premises placing a stronger emphasis on food, entertainment, and beverage services, spurring foot traffic.
Identifying a valuations base level is vital during a crucial period for another M50 commercial centre: the Dundrum Town Centre. It stands singularly as the only super prime shopping centre in Ireland.
The owners of Dundrum, Hammerson – a UK property collective, and Allianz Real Estate from Germany, are in the process of refinancing €600 million worth of loans collateralized against the centre, due in September.
Over the last four years, Hammerson has registered equivalent losses of €327 million for re-evaluation against its Irish properties – including 50 per cent ownership in both the city’s Ilac Centre and the Pavilions shopping complex in Swords, north Dublin. As of the conclusion of 2023, the portfolio was estimated to be worth about €750 million.
Observers tracking the sector are keenly awaiting updates on the progress of Dundrum’s refinancing when Hammerson announces its biannual results next Thursday.

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