Irish Life offers €125m for offices under construction

Commercial Property Editor Irish Life is in advanced negotiations to forward purchase a substantial new office headquarters under construction at City Quay in Dublin 2 for business advisory firm Grant Thornton.

Irish Life has outbid five overseas investment funds with its offer of more than €125 million for the completed eight-storey block, one of the largest in the docklands in the current development cycle. The agreed rent roll of more than €6 million will provide a net initial return of about 4.65 per cent.

Unofficial sources estimate that construction and site costs could run to about €70 million, leaving most of the profits of about €55 million to be divided between the National Asset Management Agency (Nama) and the US investor Oaktree Capital Management, each with an estimated 38 per cent of the equity. The Bennett Group, who are handling the construction contract, will also share the profits along with a small number of private investors including Frank Kenny, a senior adviser to Hibernia Reit and an expert in the Irish and US property markets.

Ongoing negotiations

Neither Savills, who are handling the sale, nor CBRE, who are advising Irish Life, would comment on the ongoing negotiations.

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The unsuccessful bidders were the American investment group, Hines, who recently bought the former Central Bank in the city centre, and two German-based funds, GLL Real Estate Partnership, which owns a number of buildings on Grafton Street, and Union Investments, which bought the Facebook headquarters at 4 and 5 Grand Canal Square in the south docklands for €232 million. Two other unidentified overseas funds are also believed to have pitched for the office investment, the third-largest in the Dublin market this year.

Grant Thornton has completed contracts to rent the planned eight-storey over basement block at 13-18 City Quay, which will have an overall floor area of 10,960sq m (118,000sq ft). The 25-year lease with a mid-term break option provides for an initial rent of €565 a square metre (€52.50 a sq ft). The development is due to be completed in the second quarter of 2018. The same Nama/Oaktree/Bennett syndicate was also involved in the development of the European headquarters of Airbnb at Hanover Quay earlier this year.

Property crash

The site of the new Grant Thornton headquarters adjoins the Church of the Immaculate Heart of Mary and was acquired before the property crash by the developer Sean Dunne.

Grant Thornton employs more than 1,000 people across eight offices and is planning to create 250 additional jobs in the next 18 months. The firm has been based at 24-26 City Quay for some years and since merging last year with RSM Farrell Grant Sparks has been operating from two Dublin locations. Its revenue has grown by 46 per cent over the past three years.

Managing director Paul McCann said recently that in order for them to continue to grow at the same rate it was strategically important that they future proof the practice and come together in a flagship headquarters. “A key selling point of this building is that it enables us to stay in City Quay; it’s where we grew up and we’re very excited about our future here in our new home.”