Office sale 'exceptionally good value' at just over €40m

Investments: An IFSC office with tax breaks, a long lease and a good tenant paying a strong rent made only slightly over its guide, reports Jack Fagan

EBS Building Society has settled for a lower than expected selling price of just over €40 million for a tax-driven office investment in Dublin's International Financial Services Centre.

The 10-year-old JP Morgan Bank building at 1 George's Dock had carried a guide price of €39 million but, to the surprise of the investment market, the EBS accepted a bid which was only marginally over €40 million. Most recent office and retail investments in Dublin have been selling for significantly more than the guide prices.

Ann Hargaden of Lisney, who bought the investment for a Dublin businessman, described the purchase as "exceptionally good value", particularly as it also involved tax breaks of around €16 million.

The initial yield will be 4.75 per cent when the capital allowances are taken into account.

In the meantime, the new owner will also be hoping that the upcoming rent review in December will result in an increase, even though the present rent of €509 per sq m (€47.33 per sq ft) is considered on the strong side for a rent set in December, 2001.

The overall rent for the 3,926sq m (42,255sq ft) block and 46 car-parking spaces is €2,243,627. However, JP Morgan only pays 80.44 per cent of the full rent, equating to €1,804,000 per annum.

The 10-year-old block stands five storeys over basement and is highly rated in the IFSC. The 25-year lease to JP Morgan Bank (Ireland) Ltd has another 15 years to run.

Number 1 George's Dock was originally bought in 1996 by Chase Manhattan (which has since merged with the JP Morgan group) who then embarked on a sale and leaseback with EBS.

The purchase price of £17 million (€21.59 million) gave the building society a yield of 5 per cent, as well as about €16 million in capital allowances. The geared rent agreement formed an important part of the deal.

The lower than expected price achieved at tender by the EBS is not being seen as a change of fortune by the investment industry but rather a reflection of the timing of the sale. The investment went to tender on July 31st when the summer holidays were well under way.

An EBS spokesman, when contacted, did not comment this week on the sale which was handled by estate agent Brendan J Walsh.