An Irish property fund has finally swooped on the distressed Dublin property market and bought a high quality office investment for just over €57 million.
The Irish Property Unit Trust (Iput), which manages more than €500 million in property assets for a range of pension funds, including CIÉ, Eircom, ESB and Diageo, has acquired the offices of leading legal firm AL Goodbody at North Wall Quay in the IFSC.
The distinctive 13-year-old office block overlooking the river Liffey next to the Convention Centre Dublin was owned in the main by the family of the late Donal Geaney of Elan pharmaceuticals. The investor, Derek Quinlan, also had a small stake in the 10,683sq m (115,000sq ft) block which is regarded as one of the best in the docklands.
Israeli businessman Igal Ahouvi, who recently acquired Aldi stores in Parnell Street and Sandyford and a shoe shop in Henry Street for more than €16 million, was first to discover the Goodbody building could be bought while investigating investment opportunities in Dublin. When he decided against proceeding with the purchase of the block, Iput moved swiftly to acquire it in an off-market deal that will show a net income return of 7 per cent.
That yield is likely to become an important guide when other modern office blocks go for sale over the coming year as part of the shake-out of distressed property assets. The 7 per cent figure varies only slightly from the 6.93 per cent return recently agreed on the €107 million sale of the State Street building on the opposite side of the river Liffey.
However, with State Street paying €452 per sq m (€42 per sq ft) – and top-end rents holding rather than rising – it is unlikely to have to pay a higher rent on review in 2014.
Also on the south side of the quays, AM Alpha negotiated a return of 8.74 per cent on the purchase of Riverside 11 for €35 million, while a year earlier Northwood Capital settled for a return of 7.25 per cent on the €27 million paid for David Arnold’s One Warrington Place on the Grand Canal.
The task of putting a realistic valuation on the Alanas-built headquarters of AL Goodbody in the present difficult business climate has been helped by the fact that the tenants had prudently negotiated an upwards or downwards rent review to kick in when the double rent tax allowance and rates remission ran out in 2010.
Rent roll
This allowed the rent roll to drop by almost €1 million to €4 million, reflecting a fall from €457 per sq m (€42.50 per sq ft) to €352 per sq m (€32.75 per sq ft). That rent is broadly in line with the going rate for modern office space in the city.
Iput will also be happy that the next upwards-only review is due in January, 2015. The Goodbody lease has another 12 years to run.
Goodbody is one of the top three law firms in Ireland, with 55 equity partners and around 450 staff. It is ranked as the 28th largest law firm in Europe.
Iput’s purchase of the building comes only weeks after the pension fund sold a 50 per cent interest in the Bishop’s Square office complex at Kevin Street for around €33 million. The latest investment is in line with its policy of investing in Grade A offices let at market rents with the prospect of rental growth in the short term.
Top of the market investments such as the Goodbody building could have commanded a price of up to €100 million at the top of the market when yields frequently dropped to 5 per cent.
