TWO secondhand office blocks are being sold to private investors. A business consortium has paid £5.1 million for Merrion Hall, the headquarters of Bord Trachtla, the trade board, at Strand Road, Sandymount, Dublin 4, in a deal which will produce a net yield of 8.8 per cent. In the city centre, a businessman will have to settle for an initial return of only 6.8 per cent after agreeing to pay £1.45 million for an office investment at Hatch Street owned by the Representative Church Body of the Church of Ireland.
The Hatch Street sale again illustrates how yields are falling in the office market because of the intense competition for the limited number of investments.
Bord Trachtla currently pays a rent of £503,000 for the 55,000-square-foot building, equating to £8.75 per square foot. The three-storey building is air conditioned and stands around a central courtyard on a site of 2.6 acres. There is surface car-parking for 128 cars. The 35-year lease on the building does not run out until 2008.
Designed by Dublin architect Arthur Gibney, the building has been highly acclaimed over the years, partly because it does not unduly intrude on an expensive residential area. The new owners plan to hold it as a long-term investment.
Merrion Hall has been owned for some years by British Land, which bought it along with Temple House, a 25,000-square-foot office block in Blackrock, from the Insurance Corporation of Ireland. Bord Trachtla shared Merrion Hall with Irish Shipping until that company closed in 1984. British Land has sold several other Dublin office blocks in recent years including the Setanta Centre, Cumberland House and the Standard Life building on St Stephen's Green.
Conor Keavney of Palmer MeCormack advised the new owners of Merrion Hall.
The four-storey over basement building in Hatch Street is let to the Office of Public Works under a 35-year lease, which does not expire until 2013. The current rent of £107,000 equates to over £9 per square foot for the 11,500-square-foot building and 12 car-parking spaces. The tenants include OPW architects, the Criminal Injuries Compensation Tribunal and the Censorship Board. It was developed by Guinness & Mahon in 1978 and sold to the Representative Church Body in 1984. The building was the last property investment held by the church body. At one stage, its property portfolio was valued at over £5 million.
Ian French of Hamilton Osborne King, who handled the sale, said there was huge competition for the investment from nine parties, including institutions and private investors. The interest reflected the shortage of investment properties.
Although terms are agreed at £1.45 million, formal contracts have yet to be completed. John McNally of McNally Handy acted for the purchaser.
The two buildings changing hands are the latest in a series of sales of secondhand office blocks over the past six months. With property investments generally scarce at the moment, much of the emphasis has switched to the older office blocks because of the indication rents are on the upward track, holding out the promise of income growth. The importance investors traditionally have placed on location when buying a property has fallen into second place behind security of income. Even buildings located in unfashionable areas have proved popular with investors when the income stream is secure.
