€30m price drop for Ballsbridge block

An unnamed investor has availed of the sharp fall in commercial property values to buy an office block in Ballsbridge, Dublin 4, for €16 million – a full €30 million less than it made in 2007.

Although only one floor of the eight-storey high Carrisbrook House is currently occupied, the State is locked into a long-term rental arrangement under which it will have to pay a minimum of €1.3 million per annum for the empty space over the next 22 years.

The block was part of a larger portfolio of properties assembled by investors Bernard McNamara, Gerry OReilly and David Courtney when they were jockeying for a stake in the planned high-rise redevelopment of the centre of Ballsbridge.

The buildings they acquired were directly opposite the seven-acre Jurys and Berkeley Court hotels which was targeted for a 37-storey tower.

Despite the buying frenzy on all sides when Ballsbridge values peaked at €133 million an acre, the planners would not allow any blocks to exceed 12 storeys.

Negotiate

The property crash then followed and the banks and Nama have now been left to pick up the pieces.

Michele Jackson of DTZ Sherry FitzGerald is handling the most recent sale of Carrisbrook House on the instructions of Declan McDonald of PwC who was appointed receiver by the Danish-owned National Irish Bank.

The new owner of the block is likely to attempt to negotiate the departure of the Embassy of Israel which occupies the fifth floor under a long running sub-lease with break options every five years. The tight security arrangement around the embassy has made it infinitely more difficult to let the adjoining floors.

The current rent of €377 per sq m (€35 per sq ft) was due to have been reviewed in 2011 under its upwards only clause but not surprisingly the issue was not pursued as the going rate for buildings in this location is considerably lower.

Redevelopment

The new owner will get a return of at least 7.5 per cent on the purchase. In the longer term, Carrisbrook is likely to be redeveloped and enlarged now that the purchaser has agreed to acquire an adjoining residential mews at 122 Baggot Lane which had been valued at around €500,000.

It is currently rented at €17,500 per annum. McNamara had also bought in an adjoining petrol filling station to facilitate a larger redevelopment but this has not yet been offered for sale.

The former State agency AnCO originally signed a 65-year lease in 1969 on the hexagonal-shaped Carrisbrook House which extends to 2,957sq m (31,823sq ft) and includes a basement with 65 car parking spaces. When AnCo moved out it managed to sub-let the space to a number of tenants including AIB.

In more recent years Forfás has not managed to find a replacement tenant largely because of the tight security procedures mounted by the Israelis.

DTZ Sherry FitzGerald has also secured a buyer at around €4 million for a second office investment close by at 85 Pembroke Road. The McNamara led consortium bought it in 2005 for €10.5 million.

The 874sq m (9,410sq ft) building is let to AIB Capital Markets Corporate Finance Ltd on a 35-year lease from the end of 1989 with no break options. With the rent currently at €345,000 per annum, the purchaser will get a return of about 8.4 per cent.

If and when AIBs trading position has been strengthened it will undoubtedly switch Capital Markets to its nearby HQ where it will have spare space once it slims down its workforce. That transfer can only be achieved if it pays a reverse premium to the new owner.