Frascati sale creates fizz for retailers

Frascati is the first incursion into the Irish property market by Invesco, which has watched the sector closely over the past 18 months. The firm looked at Dundrum Town Centre “briefly”, but it was too low-yielding for investors.

Invesco’s purchase of Frascati is part of a more opportunistic strategy calling for higher risk and higher-return investments. The firm is interested in properties that require renovation and development.

To this end, Frascati seems ideal. Built by the Roche family of Roches Storesin the 1980s, the centre has mostly small units and is in need of modernisation.

Last October the Roches were granted permission to increase the Frascati’s size from 102,000 sq ft to about 170,000 sq ft, adding about 17 stores on two levels, a restaurant and underground parking. To carry out the development Invesco has teamed up with Burlington Real Estate, the Irish asset and development management company that grew out of the old Treasury Holdings and manages assets including Stillorgan Village shopping centre.

John Bruder, chief executive of Burlington, said the planning consent was “very good” and one that Frascati’s new owners would implement “in the short term”. He said: “We are currently focused on the initial development plans, but we will certainly look for future opportunities if or when the time is right.”

Frascati will remain open during the work, with builders due on site early next year. “To implement that development while not impacting on trade in the existing centre is going to require very careful planning and preparation,” Bruder said. “We’ll be looking to get it completed as soon as we possibly can.”

The aim of the development will be to improve dwell times at Frascati, and Bruder said the management would introduce greater leisure content. “There is scope to attract shoppers into Frascati who previously may well have been enticed elsewhere,” he said. “The number one priority is to entice them to come to Frascati more often than in the recent past, and number two to get them to stay a bit longer and spend a few bob.”

Neither Bruder nor Brassington would comment on the redevelopment cost, which has been reported as more than €30m.

With Dundrum Town Centre, the Park at Carrickmines and Stillorgan Village within easy reach — and Blackrock Centre across the road — Frascati faces tough competition. Its location in an affluent area, however, was one of the draws for Invesco.

“Is there oversupply today in south Dublin? I think probably not, and that’s partly because there has been absolutely zero delivery of new supply for the past seven or eight years,” Bruder said.

“Will there be oversupply in the future? Probably, yes, because that’s the nature of the cycle. How will Frascati fare in that landscape? I think it will fare very well because I think we have the head start in terms of delivery of new supply.”

Bruder said a good mix of retail and leisure would make Frascati “relatively immune to the battles that will no doubt be fought between other developers in other retail locations”.

Frascati retained full occupancy through the recession and has tenants including Debenhams, Marks & Spencer, Boots and Vodafone. Its rent roll is about €3.8m.

When the news of the acquisition spread, retailers and their agents approached the partners with a view to taking space.

Bruder would not name names but said the asset managers were in discussions with existing retailers to “potentially extend their space” and with new retailers to take space. “That’s very encouraging. The notion of retailers actually coming to a landlord or developer expressing interest is a breath of fresh air,” he said.

Bank of Ireland provided acquisition financing for the Frascati deal, and Brassington said the bank was “pretty competitive” and “prepared to lend”.

Bruder said: “Eighteen months or two years ago it would have been difficult to attract more than one, or at most two, local domestic lenders to even have a conversation about commercial real estate property investment.

“It’s fair to say that when we came looking to discuss terms with lenders on Frascati, we had quite an amount of interest from the Irish banks and, indeed, from some international banks.”

Despite the delays in completing the purchase — it was first reported by The Sunday Times in February and had to receive approval from the Competition and Consumer Protection Commission — Brassington said the acquisition had been relatively straightforward.

Invesco is arriving on a swelling wave of property activity. “A good time to react was two years ago, before anyone else did, and there were certain purchasers who were able to take that risk at that point,” Brassington said. “It was a risk because there was no certainty that things were going to level or improve.”

The fund waited until it was more confident about and comfortable with the market. “Arguably, we’ve missed out on some of those easy returns, but it’s only in hindsight that it looks easy,” Brassington said. “At the time it was a brave call by some [investors].”

The Frascati purchase was Invesco’s third European investment under its opportunistic strategy. Last year the firm bought a 23% stake in Generator, a European hostel business with a property in Smithfield.

Invesco has $62.1bn (€55bn) of assets under management globally and 20 offices worldwide, but not in Ireland, hence the link-up with Burlington. The European arm of the business has €6.5bn under management, and this year it has transacted €2bn of deals in sales and acquisitions, surpassing the figure for last year.

“The fact that Invesco has no particular affiliation or loyalty to Ireland and has identified and undertaken this investment is positive proof that on a world stage the Irish property market does produce attractive opportunities,” Bruder said.

Frascati is unlikely to be Invesco’s only move here as it seeks more opportunistic investments. “We are looking at opportunities in Ireland in all sectors,” Brassington said.