IRISH Life has reversed its decision to sell a substantial office investment in the Dublin docklands because of a significant fall-off in the level of redemptions by retail investors at its unit-linked property funds.
Almost 12 months after it sought a buyer for a 50 per cent stake in a €100 million office building at Sir John Rogerson’s Quay in the south Dublin docklands, a willing Irish purchaser emerged.
But by then, Irish Life had decided against proceeding with the sale because of the improved investment climate and the increased number of buyers in the market.
Irish Life said the market had undergone a substantial correction and there were encouraging signs of prices stabilising at yields which were now generating interest amongst buyers.
“In the light of this, we are currently considering reopening these (unit-linked) funds to investors over the coming months.”
The states largest property institution said that while it may have some properties on the market in the coming months, these would be “stock specific disposals”.
The €50 million sought for a half share in the head office of leading solicitors Matheson Ormsby Prentice (Mops) at Sir John Rogerson’s Quay would have provided a net yield of 6.75 per cent.
Irish Life bought the block known as Riverside IV at the peak of the market in July 2006 for €170 million.
By the time property values generally had been written down last autumn, Irish Life had revalued the block at €100 million.
Other institutions and most private investors, including those who bought a range of functioning bank branches, have also had to revise their values down from the peak of the market in 2006 and 2007.
Agent Jones Lang LaSalle, which was responsible for marketing the MOPS office investment, has estimated that capital values of the commercial property market fell by 59 per cent between Q3 2007 and the same period in 2009.
John Moran of Jones Lang, who advised Irish Life on the sale, had detailed negotiations with overseas funds as well as with a number of Irish parties about the proposed disposal. Some of the overseas funds are continuing to monitor the Irish market because of the perception that with yields generally moving close to 7 per cent for top class properties, Dublin is offering value for the first time in years.
The increased level of interest from overseas investors has also been triggered by international news coverage of the economic and financial crisis in Ireland and the expectation that Nama will force the sale of many high profile investment properties at huge discounts.
Riverside IV was originally developed by Sean Dunne and sold in part exchange for the Irish Life-owned Hume House next to his extensive former Jurys hotel site in Ballsbridge. The MOPS block was valued at €170 million while the 7,432sq m (80,000sq ft) Hume House had a sale price of €130 million. The seven-storey over basement MOPS building is part of a larger complex overlooking the river Liffey. MOPS pays an annual rent of over €7 million for the block which has 12,355sq m (133,000sq ft). There are 85 car parking spaces in the basement rented annually at €4,500 each.
The 25-year lease runs from 2007 and provides for a break option in year 15. From an investor’s point of view, the problem with the block is that with the fall-off in rents over the past two years, Riverside IV is clearly over-rented at €559 per sq m (€52 per sq ft). Prime rents in the docklands are currently hovering just over €430 per sq m (€40 per sq ft); the precise rent is difficult to discern because of the range and size of the incentives being offered by developers to attract the few prestigious tenants looking for space.
