€6.7M multi-storey “could be described as worthless”

Paul Neilan

The multi-storey ‘white elephant’ in Cavan Town, which is to be bought for around €6.7M next year, could be described as “worthless”, according to property insiders.
The controversial development takes in around €65K in parking fees a year, but between tax, insurance, maintenance and wages means that a simple multiplier, used to calculate the value of a commercial property, puts its value at around €434K - some €6.26M shy of what the council is paying.
“The thing to remember when calculating commercial property over residential or the family home, for example, is that it is based primarily on what is coming in per annum, either profit or an anchor tenant and then multiplied by a figure based on location, quality of property, costs and so on,” said one local property source.
The current tenant, however, is actually the council itself, which pays €500K per annum in rent and running costs from the group known as the Virginia Consortium.
The council has also been the tenant at the multi-storey, through a paper company called Glassell Ltd since 2002 and has forked out €5M so far. Next year, despite legal avenues being apparently exhausted it will have to purchase the building from the consortium.

“Madness”
“On the face of it, it’s madness,” says one property expert, “especially if you consider that right next to it in the centre of the town the cinema complex is on the market for the guts of €2M - and that has anchor tenants, but the deal was done a long time ago. I know hands are tied now and it was deemed to be a good one at the time, but times have changed.”
The cinema has an ex VAT sale price of €1.95m and is directly adjacent to the car park. It, however, carries a yield of 15 per cent per annum, because of a contracted rent of €292,876 per annum and it is anchored by The Odeon Cinema which accounts for just over a quarter of the scheme’s total contracted rent.
The multiplier, therefore, on the value of the cinema - income alone compared to price - is 6.65.
That figure means that at the price the council is buying the car park, €6.7M, it would need to take in just over a million a year to apply the same multiplier.
Even if it was its own tenant paying a long-term €400K, which it has done since 2002, the value of the car park comes to €2.66M - €4M short again.
“Whatever the deal that was struck I can’t see it being anything other than worthless on the current figures,” says another expert.
“If you were to buy it you would really need to make a go of it but at that price... who would have the money left over? They [a buyer] would have to get something else out of it, promote it, change the set-up completely to get something out of it and it’s right in the centre of town.”

Buy-out
At the last council meeting, members heard that the decision to buy the ‘white elephant’ was down to several factors - with the contract previously being described as ‘cast-iron’ - but sinking €500K of dead rent money into it was not an option.
The decision to activate the €6.7M buy-out, councillors were told, represented the best option from a 2001 deal agreed in “different times”.
At the current rate of income it would take the council, without any overheads, 103 years to recoup the buy-out fee alone, not including the €5M already paid in rent and overheads.
The council would have been forced to pay €8M if they did not exercise the buy-out option, such is the strength of the contract with the Virginia Consortium - apparently a group of individuals and not a limited company, with addresses in Dublin, Sligo, Limerick and Wicklow - and will now look at specialist tax relief on the purchase to ease the burden.