The Bank of Ireland is moving part of its banking operation from the IFSC to nearby Talbot Street in Dublin 1, where it has leased a newly completed block of 56,000 sq ft.
The move will clear the way for the bank to seek over £70 million (#88.9m) for its IFSC headquarters building, La Touche House. It plans to lease back one floor of the building as well as a small branch office on the ground floor.
The sale will be seen as an acceleration of the move away from property ownership by banks and a reminder that the corporation tax advantages of locating in the IFSC come to an end within two years. However, La Touche House still carries £37.7 million (#47.9m) in capital allowances following a clawback of the tax breaks claimed by the bank since moving into the building in 1992.
Hamilton Osborne King, which is handling the sale, says although the bank has had to repay the capital allowances, the value now being added to the investment should more than compensate for the clawback.
The agents estimate that when space being vacated by the bank is relet, the rent roll from the block should rise to around £4 million (#5.1m). On this basis a selling price of £70 million (#88.9m) would produce a net yield of just over 5 per cent, and 6 per cent once the allowances are taken into account.
With the £37.7 million (#47.9m) available in capital allowances, the building will obviously be targeted at high net worth individuals with a significant level of surplus income from any source. The allowances will also appeal to successful property companies and financial institutions as well as pension funds catering for private clients. The tax shelter will not be affected by the £25,000 (#31,740) cap on capital allowances for individuals which was introduced by the Government in recent years.
The decision by the bank to lease the new Talbot Street block at £30 (#38.09) per sq ft - the 25-year lease provides for a break clause in year 15 - will be another important anchor for the redevelopment of one of the most rundown areas of the north inner city. Bord Gais is moving its Dublin headquarters to the same area.
Bill Nowlan advised the bank on the new office building, which was developed by Linders. DTZ Sherry FitzGerald was the letting agent.
Hamilton Osborne King, which is handling both the sale and the assignment of the freed-up space, said the accommodation was coming on the market as a result of the merger of Bank of Ireland Treasury and the bank's International departments into a single division. "The 33,000 sq ft in La Touche House is not big enough to accommodate the newly merged division, who are moving to new offices on Talbot Street," according to a statement from the agency.
In fact, La Touche House has 101,000 sq ft, though most of the space has been sub-let to other licensed traders. The bank also occupies 80,000 sq ft in New Century House, an office building completed in the second phase of the IFSC.
Hamilton Osborne King expects to achieve £42 (#53.33) per sq ft for the 27,500 sq ft that the bank is shortly vacating on the third and fifth floors of La Touche House. "As result of the reduced occupation by Bank of Ireland and the bank's policy of not retaining buildings where they are not the majority tenant, the investment in the building will be offered privately to targeted investors in June."
The bank will continue to operate a branch at street level, where it is to take a new 25-year lease of 1,242 sq ft. Bank of Ireland International Finance will also take a new 20-year lease, with a 15-year break, of just under 20,000 sq ft on the fourth floor - at 75 per cent of the open market rental value. There are seven other tenants in the block including IBM, Dresdner Bank, Hibernian Asset Managers and XL Insurance, but most of the leases have break options.
