€11.59m portfolio to test strength of investment market

Canada Life may have to accept lower prices in all cases if it is to shift a portfolio of four investments in the present difficult market, writes Jack Fagan

ANOTHER TEST of the strength of the commercial property investment market is to be unveiled today when Canada Life offers for sale a retail premises in Dublin city centre, a Georgian office building on Upper Mount Street and two industrial investments.

Although the insurance giant describes the sale as "part of the group's ongoing asset management programme" it has been known since last year that it planned to offload several investments with values below €5 million which are no longer considered economic for an institution to manage.

Several other institutions are expected to come under pressure in the coming months to offload some of their property holdings, not necessarily because of their size, but due to a high level of redemptions by small investors.

Significantly, Canada Life has taken notice of the drifting yields in the commercial market when putting a guide price of €11.59 million on its four Dublin properties. However, it may have to accept lower prices in all cases if it is to shift the investments in the present difficult market.

While it is still uncertain whether the Government's guarantee to the Irish banking sector will lead to some resumption in lending, there are still any number of cash-rich investors waiting in the wings for prices to fall to a level that would encourage them to re-enter the market.

Suzanne O'Loughlin of agent HWBC says that while it is a "testing time for the investment market" properties such as those being offered for sale by Canada Life are rarely brought to the market. She expects interest in them both from private investors and institutions.

Investors are being offered a net yield of 4.25 per cent on the retail investment at 17 North Earl Street which has a guide price of €3.17 million. The four-storey over basement building is let to Eurosaver at a rent of €130,000 per annum. The lease has another 16 years to run on the 257sq m (2,766sq ft) premises which adjoins Boyers and is opposite Clerys department store.

Canada Life is also hoping to attract interest in a Georgian office investment at 41 Upper Mount Street by offering a net yield of 5 per cent. The four-storey over basement building is let to Screen Scent Ltd at a rent of €163,796 per annum. The lease has another 16.5 years to run. The house has a floor area of 370sq m (3,983sq ft) and there are nine car-parking spaces to the rear. The guide price here is €3.03 million.

HWBC is quoting €3.19 million for an industrial investment at 23 Western Industrial Estate off the Nangor Road in Dublin 12. The yield would work out at 6.26 per cent. The property includes three terraced units extending to 2,224sq m (23,939sq ft) which are producing a combined rent of €222,500. The building, which fronts on to the M50, is let to strong covenants on long to medium term leases.

The second industrial investment at 78 Broomhill Business Park in south-west Co Dublin comes with a guide price of €2.2 million and a yield of 5.49 per cent. The substantial detached warehouse has 1,464sq m (15,758sq ft) of offices at two levels and is let to 3M Ireland Ltd on a long lease which has another five years to run.

The sale of the Canada Life portfolio comes a week after Jones Lang LaSalle reported that overall property funds' values have slipped by 25 per cent this year and probably have another 10 per cent to go. Some of the institutions are loathe to accept such findings, arguing that without precise transactions it is largely a speculative exercise.

A more precise indication of how far yields have shifted may be forthcoming shortly if Irish Life manages to find buyers for its three-building office portfolio which is on the market at around €90 million.

Canada Life has substantial property holdings in Dublin with an estimated value of around €200 million. They include the OPW-occupied office block at Earlsfort Terrace, AIG House at the Merrion Centre, 47 and 48 Grafton Street, and several other retail properties on Henry Street.