STATE STREET bank’s Irish headquarters in the south Dublin docklands is expected to be offered for sale as part of Ulster Bank’s disposal of €1 billion of distressed property loans over the coming months.
Ulster Bank, part of Royal Bank of Scotland, provided the funding for the 16,071sq m (173,000sq ft) block which has an annual rent roll of €7.82 million. A sale at this stage could yield a price of at least €85 million – equating to a net return of 8.8 per cent.
The block was developed by Liam Carroll’s collapsed Danninger Group which gave the American bank two years rent-free until January, 2011.
State Street signed a 25-year lease from January, 2009, and with its present rent working out at €452 per sq m (€42 per sq ft) – compared to the going rate of €269-€323 per sq m (€25-€30 per sq ft) – it will not face any increase when the next review falls due in 2014.
More importantly, the bank has a break option in 2019 (at the cost of a nine-month rental penalty) but with many of the big investors looking for a guaranteed income of at least 10 years they may well trim back their offers because of the danger of a lower rent being set in seven years time.
On the positive side, the office building is generally regarded as having what is possibly the highest specification of any block in the entire Dublin docklands. Though Carroll had a reputation for skimping on fit-outs and poor finishing generally in both commercial and residential developments, State Street Bank got what it wanted when it stipulated that it would only rent the eight-storey block if it got the same high quality fit-out as in its overseas branches. With so much riding on the letting, Carroll duly complied.
The forthcoming sale by Ulster Bank is also expected to include an adjoining site at Sir John Rogerson’s Quay which will come in handy if the bank requires additional space in the future.
With a total of about 70 loans earmarked for inclusion in the portfolio, it seems inevitable that Ulster Bank will sell the properties in lots rather than individually. This could mean that the State Street bank could, for example, end up being sold as part of a package which might include a secondary office block in the city, a retail complex in the Dublin suburb of Tyrrellstown or a block of apartments in Tallaght.
The bank portfolio is almost evenly divided between the Republic, Northern Ireland and the UK. Four Dublin estate agents are currently pitching to handle the Irish sales for the bank.
