US bank buys Dublin offices (incl gratuitous gazumping)

[gaius]

The return of competing investors will be welcomed in a market dormant for two years after an overseas buyer pipped a US bank for a Dublin office portfolio, writes JACK FAGAN

A US investment bank on the verge of buying a €50 million office portfolio from Irish Life has been gazumped by another overseas buyer.

There is more…

With the four office blocks producing a rent roll of €4.2 million, the bank had expected to avail of a net yield of around 8.5 per cent. The alternative buyer is settling for a return of about 8.3 per cent.

Assuming rents stay stable, that’s a reasonable enough yield.

September, 2009, cut its asking price for the three office buildings from €81 million to €40.8 million.

50% drop in asking price and eventual 36% drop from original asking price to selling price. There’s a lesson there.

The buildings:

The five-storey Hambleden House has a floor area of 3,729sq m (40,140sq ft) and 67 surface car-parking spaces on the opposite side of the road. The lower ground floor has been vacant since the expiry of a short lease held by Anglo Irish Bank. The building has the potential to yield a rent of around €1.7 million.

The 1,625sq m (17,500sq ft) Seagrave House is partially vacant but its tenants include Nortel Network, GVA Planning and Regeneration, and asset managers the LGT Group. When fully let the building would be expected to produce a rent of around €850,000.

Davitt House, a 4,087sq m (44,000sq ft) building, is rented to the Office of Public Works at €1.7 million. The lease has another five years to run.

The building at 25 St Stephen’s Green is close to the Lisney office and, apart from the long vacant CompuStore, includes 1,393sq m (15,000sq ft) of offices and three apartments. It is producing a rent of €600,000 per annum.

[dipole]

@gaius

The return of competing investors will be welcomed in a market dormant for two years after an overseas buyer pipped a US bank for a Dublin office portfolio, writes JACK FAGAN

A US investment bank on the verge of buying a €50 million office portfolio from Irish Life has been gazumped by another overseas buyer.

There is more…

With the four office blocks producing a rent roll of €4.2 million, the bank had expected to avail of a net yield of around 8.5 per cent. The alternative buyer is settling for a return of about 8.3 per cent.

Assuming rents stay stable, that’s a reasonable enough yield.

September, 2009, cut its asking price for the three office buildings from €81 million to €40.8 million.

50% drop in asking price and eventual 36% drop from original asking price to selling price. There’s a lesson there.

The buildings:

The five-storey Hambleden House has a floor area of 3,729sq m (40,140sq ft) and 67 surface car-parking spaces on the opposite side of the road. The lower ground floor has been vacant since the expiry of a short lease held by Anglo Irish Bank. The building has the potential to yield a rent of around €1.7 million.

The 1,625sq m (17,500sq ft) Seagrave House is partially vacant but its tenants include Nortel Network, GVA Planning and Regeneration, and asset managers the LGT Group. When fully let the building would be expected to produce a rent of around €850,000.

Davitt House, a 4,087sq m (44,000sq ft) building, is rented to the Office of Public Works at €1.7 million. The lease has another five years to run.

The building at 25 St Stephen’s Green is close to the Lisney office and, apart from the long vacant CompuStore, includes 1,393sq m (15,000sq ft) of offices and three apartments. It is producing a rent of €600,000 per annum.

Hmmm.
I’m working from a 3 storey modern office that is going to be handed back to the landlord in July. The other half of the office building has been lying vacant since I moved in here a few months ago. I’ll be moving back to our company’s other office which is being refit to accomodate all our staff.
Just because those buildings are generating income now doesn’t mean they’ll be generating any income when the leasehold expires in coming months or years.

In the short term the winner bidder can congratulate themselves on their high yield but in a while it will be evident enough if they got a bargain or not.

[gaius]

Anyone want to hazard a guess what these would have been selling for back in 2006?

[Duplex]

@gaius

Anyone want to hazard a guess what these would have been selling for back in 2006?

From June 2006.

However, despite the low-yield environment, strong rental growth has emerged to underpin performance, particularly in the office sector," the report states.

As a result, initial yields of between 2pc and 3pc have been achieved on a number of transactions in the Irish market in recent months, which CB Richard Ellis says is very significant in European terms.

independent.ie/business/iris … 95099.html

The commercial market is still seriously over-rented.

Edited to add.

By Donal Buckley Commercial Property Editor
Wednesday April 14 2010

**Dublin’s office, retail and industrial rents are still among the most expensive in Europe **despite the (freehold) values for similar Dublin properties falling to some of the cheapest.

Dublin retail rents have fallen 35pc from their peak and three places from their top five position a few years ago, nevertheless CBRE’s survey shows the retail rents in Dublin are now almost double those of the three British cities.(Glasgow, Edinburgh and Manchester)

Dublin prime offices rents have fallen 44pc from their peak to €376 per sqm in Q1 while yields have moved out 375 basis points to 7.5pc. Nevertheless prime Dublin office rents are still 12th most expensive while its values rank at only 37.

independent.ie/business/comm … 36349.html

[mr_anderson]

With the four office blocks producing a rent roll of €4.2 million, the bank had expected to avail of a net yield of around 8.5 per cent. The alternative buyer is settling for a return of about 8.3 per cent.

If thats what Dublin yields are achieving, anyone hazard a guess as to yields from outside the Pale ?

[tdaly]

Dublin office rent market improves in Q1
Wednesday, 14th April 2010 02.20pm

Activity improved in the Dublin office market in the first three months of 2010 with a quarterly increase in letting activity in the capital of 26pc and a year-on-year increase of 143pc, according to CB Richard Ellis’ latest report.

fxcentre.com/news.asp?2584446

[The_Unwelcome_Guest]

“The level of vacancy in the capital fell in Q1 2010 for the first time since 2008. Overall vacancy in Dublin fell 45 basis points to 23pc in Q1, although there were minor increases in vacancy in some districts. Several trends are at play. The make-up of the vacant office stock in Dublin continues to shift as occupiers exercise break options and move from older, sometimes obsolete, offices into new “Grade A” accommodation. As they move, the quality of vacant accommodation continues to deteriorate and there is limited 'net absorption,” the report said.

Ye olde flight to quality… Interesting that they assert that overall vacancy has fallen… The real question is where does Dublin begin and end?

[DSE3Br]

@dipole

Hmmm.
I’m working from a 3 storey modern office that is going to be handed back to the landlord in July. The other half of the office building has been lying vacant since I moved in here a few months ago. I’ll be moving back to our company’s other office which is being refit to accomodate all our staff.
Just because those buildings are generating income now doesn’t mean they’ll be generating any income when the leasehold expires in coming months or years.

In the short term the winner bidder can congratulate themselves on their high yield but in a while it will be evident enough if they got a bargain or not.

I’m assuming they have priced this in and their long term yield target is closer to 4%. Either that’s the case or the supply of greater fools is still plentiful.

[ewd3]

This is brilliant news for the investors the bank and Irish people
only a 36% haircut is great.

I would encourage any overseas investors looking at this deal to realise that this kind of investment opportunity won’t last for ever and they would be well off diving straight in and taking as much of this stuff off NAMA as they can lay their paws on…

[gaius]

@ewd3

This is brilliant news for the investors the bank and Irish people
only a 36% haircut is great.

I would encourage any overseas investors looking at this deal to realise that this kind of investment opportunity won’t last for ever and they would be well off diving straight in and taking as much of this stuff off NAMA as they can lay their paws on…

It’s a 36% haircut on a 2009 price, not a 2006 price!

[ewd3]

@gaius

@ewd3

This is brilliant news for the investors the bank and Irish people
only a 36% haircut is great.

I would encourage any overseas investors looking at this deal to realise that this kind of investment opportunity won’t last for ever and they would be well off diving straight in and taking as much of this stuff off NAMA as they can lay their paws on…
It’s a 36% haircut on a 2009 price, not a 2006 price!

like I said

brilliant!!