A substantial under-rented office building with considerable investment potential just off Dublin’s O’Connell Street is expected to be of interest to Irish and overseas funds when it is offered for sale today.
Ross Fogarty of agents Knight Frank is guiding in excess of €11.5 million for Telephone House, a late 1970s block on Marlborough Street with a long association with Eircom. It is now rented as a call centre by global conglomerate HCL which is contracted to provide customer and technical support services to the newly named company Eir.
The nine-storey over part basement office building with its distinctive reinforced concrete frame was owned for many years by businessman Ben Dunne. It was bought about six years ago by Alburn, a company controlled by solicitor and property investor Noel Smyth. It is to be sold again with the consent of Nama.
Parking spaces
The block has a net floor area of 7,154sq m (80,773sq ft) and is let to HCL on a ten-year lease at a rent of €968,084 per annum, equating to a low base of €10.46 per sq ft. Eircom had been paying rent of €27 per sq ft until the lease ran out.
HCL also pays €2,000 for each of the 61 parking spaces on site. Even with the unusually low rent agreed for the new letting, a new owner paying the €11.5 million guide price will be able to bank on a return of 8 per cent after standard acquisition costs are taken into account.
The ten-year lease from July 2015 provides for a review at the end of the fifth year. There are also tenant break options in September 2021 and 2023 subject to six months notice. HCL is also entitled to assign or sub-let the entire building or part of it to Eir or any of its subsidiary companies on condition that Eir provides a guarantee.
New owners are likely to look for an opportunity to upgrade the dated building internally in the coming years. One office agent suggests that the rental income could be significantly increased through the expenditure of €40-€50 per sq ft. Two telecommunication masts on the roof of the building are producing an additional €16,000 per annum.
Redevelopment
The block is in an area set to undergo improvement in the coming years. The adjoining Findlater House on O’Connell Street is being converted into a 200-bedroom plus hotel by a UK company. On the opposite side of the street, new owners are expected to embark on the redevelopment of the
Carlton Cinema
site to link it up with Moore Street at the rear.
Clerys
is also in line for significant changes later this year.
The viability of these large-scale projects will be enhanced by the ongoing construction of the Luas cross-city line which will link the southside green line to the northside red line. The new transport infrastructure will travel down Marlborough Street and have a Luas stop within 50 metres of Telephone House.
Mr Fogarty said the sale would give investors an “attractive medium-term return prospect”.
There is also scope for adding value – through increasing the low base rent – when the flexible open-plan floor plates, good parking and a highly accessible location with lots of amenities are taken into account.
