The Central Bank of Ireland will be hoping to capitalise on the as yet undimmed appetite amongst international investors for opportunities in Dublin's docklands as it brings Block R in Spencer Dock to the market.
Agent Lisney is guiding a price of €110 million for Block R, offering the prospective purchaser a net initial yield of 4.07 per cent based upon the current rent roll of €4,924,469 per annum.
The proceeds of the sale, the plans for which have been in train since 2018, will be used to partially offset the €205 million the bank spent last year on the acquisition of blocks 4 and 5 at Ballymore and Oxley’s Dublin Landings scheme. Located immediately adjacent to the Central Bank’s North Wall Quay headquarters, those two buildings’ combined floor area of 200,000sq ft (18,850sq m) will be used to accommodate the expansion of the bank’s existing 1,815-strong workforce by up to 300 employees.
Block R in Spencer Dock, meanwhile, extends to a total area of 128,229sq ft (11,913sq m) and is located directly behind the Convention Centre Dublin and adjacent to Salesforce’s new European headquarter campus, which is under construction currently.
Neighbouring offices
Other office occupiers in the immediate vicinity include the NTMA, Microsoft, PwC, Credit Suisse, Custom House Global Fund Services, Optum (UnitedHealth Group), WeWork, Metzler, HubSpot and A&L Goodbody solicitors.
Designed by Scott Tallon Walker Architects and built by Johnny Ronan and Richard Barrett's former company Treasury Holdings in 2008, the subject property comprises seven floors of office accommodation, three ground-floor retail units and 46 basement car-parking spaces. The building was designed to be split into two self-contained wings (east and west).
The majority of one wing (53,173 sq ft, or 4,940sq m, and 18 car spaces) is let to the Office of Public Works (OPW) under a 20-year lease from May 2015, at a passing rent of €1,582,719 per annum, which equates to about €29 per sq ft plus €3,500 per annum per car space. However, there is an outstanding rent review from May 2020 and the new owners will be able to implement this. The OPW lease contains a break option which is effective in May 2027.
The remainder of the office space (64,835sq ft, or 6,023sq m) and 25 car spaces will be leased by the Central Bank on a short-term basis until April 30th, 2022, at an annual rent of €3,341,750, equating to €50 per sq ft plus €4,000 per car space. The three retail units are vacant.
Total rent
While the total passing rent will amount to €4,924,469 per annum upon completion of the sale, the selling agent says the property has the potential to deliver up to €6,330,625 in annual rental income assuming the retail units are let and once the OPW rent review is completed on the same basis as the Central Bank’s rent. Should those targets be met, the purchaser would secure a reversionary yield of 5.24 per cent.
James Nugent and Thomas Byrne of Lisney say they expect the Spencer Dock property to appeal to a wide range of investors.
They say: “The west wing provides income from the Irish Government until 2027 and would be considered by institutional investors as relatively dry, although the outstanding rent review provides considerable upside.
“On the east wing, whilst the income stream is short term, it is unquestionably secure and will enable a purchaser to ride out the [Covid-19] pandemic whilst collecting income and using the intervening time to consider possible upgrades and a reletting campaign.”
