IFSC investment for sale at €11m

THE UNCERTAINTIES about the Dublin investment market, because of the Government’s plans to introduce legislative changes in retrospective rent reviews, will be tested again in the coming weeks when a modern office block in Dublin’s IFSC is offered for sale at a net yield of 8.36 per cent.

Duncan Lyster of Lisney is seeking offers around € 11 million for Plaza 4, one of a number of blocks that form part of Custom House Plaza, which is to be sold by private treaty.

Initial indications are that it will be of interest to both Irish and overseas investors because the high quality five-storey building is rented by four financial institutions – two of them German – under 25 year leases which have more than 10 years to run.

The 1,814sq m (19,535sq ft) block has 22 car parking spaces at basement level. The current rent roll of €996,925 a year equates to a rent of €505 per sq m (€ 47 per sq ft) which is somewhat ahead of the going rate in the docklands. The next rent review is due in 2012.

The block was developed by the late Brian Rhatigan in 1997 as part of the Custom House Plaza, a top range development of 18,580sq m (200,000sq ft) set around a glazed atrium which serves as an entrance foyer to the six office blocks.

The building, like many more in the IFSC during the 1990s, was bought as a tax incentive by a group of investors. The two German financial institutions, Aareal Bank and Hanover, occupy a combined space of 754sq m (8,125sq ft) while Anglo Irish International Services is renting 398sq m (4,292sq ft) and Permanent TSB Finance Ltd trades out of the top two floors which extend to 657sq m (7,080sq ft). There are 22 spaces in the basement car park.

Duncan Lyster says that with office vacancy rates in Dublin city now starting to fall and no new buildings under construction Plaza 4 should appeal to investors anxious to capitalise on the city centre market.

Plaza 4 is the third office investment in the city to go for sale in recent weeks. Knight Frank is seeking € 35 million for a five-year-old block, Riverside II, on the opposite side of the city quays at Sir John Rogerson Quay, while HT Meagher O’Reilly and Lisney are expecting to secure in the region of € 28 million for a new office building, One Warrington Place, at Lower Mount Street, rented by An Bord Gáis.

Should the selling agent succeed in getting €35 million for Riverside II, the investment would show an initial return of 8.43 per cent. It will be considerably more challenging for the agents handling the sale of One Warrington Place to achieve the asking price because the yield in this case is only 7 per cent.

The commercial property investment market has been in the doldrums over the past year because of the Government’s much delayed plans to introduce legislation to allow tenants paying above the market rent to have it reviewed provided they can demonstrate that the rent threatens the sustainability of their business. The Government intervention has meant that only two investment deals have been completed this year, worth around € 30 million compared to a turnover of €250 million in 2010. Earlier this year property investor Joe Leyden paid around € 9.25 million for the Ericsson Building in Clonskeagh and in the city centre Primark bought its headquarters building on Parnell Street for €20 million.