The size of the write-down will surprise some, but it is generally in line with the dramatic fall in value of many investment properties
IRISH LIFE has reduced its guide prices for three Dublin office investments from just over €81 million to €40.8 million – a fall of almost 50 per cent to take account of the sharp slippage in capital values since the properties were first offered for sale in May 2008. The new yields available will range from 7–9 per cent.
While the size of the write-down will take some observers by surprise, it is generally in line with the dramatic fall in value of many of the investment properties in the Irish Life property funds.
The slippage is also broadly similar to that recorded by the London-based researcher, IPD. It has estimated that capital depreciation here, over a two-year peak-to-trough period up to the end of June, was the highest in Europe at 48.6 per cent. IPD’s next report, due out at the end of October, is expected to show a further slippage though it may be less than in the two previous quarters.
Reports from investment agents that Irish Life had dropped the quoting prices for the three office investments was confirmed yesterday by Colm Luddy of CB Richard Ellis who is handling the sales. He said the up-to-date valuations reflected the change in market conditions. While there had been a good demand for product with very secure rental income, like that available from AIB bank branches, the three Irish Life office buildings offered better returns to investors as compensation for the extra risk involved.
The fall-off in the capital value of the three properties held by the state’s largest property institution will inevitably be compared with the level of discounts due to be announced today by the Minister for Finance on toxic loans to be taken over by Nama.
Irish Life’s decision to push ahead with the sale of the three Dublin offices at the lower valuations suggests that it is still under pressure for redemptions from retail investors in its unit-linked funds.
The price being quoted for Hambleden House, an office building of 3,729sq m (40,140sq ft) at Lower Pembroke Street, has been cut from €39 million to €19.5 million. The current rent of €1.5m will rise to €1.75 million when the block is fully let. The initial yield of 7 per cent will therefore move up to 8.5 per cent. There are 47 car-parking spaces in nearby parks.
The price being sought for Wilson House on Fenian Street has dropped from €17.5 million to €9 million to give investors a return of 9 per cent. The 2,079sq m (22,382sq ft) block is producing a rent of €900,000.
An office block of 2,415sq m (26,000sq ft) over the Merrion shopping centre in Dublin 4 is now available at €12.3 million, half the original guide price. With the rent roll at €1.13 million, it will show a yield of 8.5 per cent.
