IDA Ireland is to decide in September whether to sell its prestigious Pearse Street Enterprise Centre, as well as a number of other properties in Dublin and Cork. The agency which is responsible for attracting overseas companies is currently selling its property portfolio.
The Pearse Street Enterprise Centre has an annual rent roll of around Pounds 600,000. It contains 209,090 square feet of units, the majority of which are let on short-term leases. Given its location, the centre is bound to be of intense interest to investors and developers.
The IDA also owns five other enterprise centres of varying size in Dublin including one in Gardiner Street, one in the Liberties and two in Tallaght, as well as one in Cork.
It also owns the 60,000-square-feet Finex building at the International Financial Services Centre (IFSC) and a high-quality office building at the Leopardstown Office Park. Comprising 10,000 square feet, it currently has three tenants, one of whom will be leaving shortly.
These properties are estimated to be worth between Pounds 40 million and Pounds 50 million, according to industry sources. If the IDA brings the properties to the market, it is likely they will be disposed of by public tender. For the last nine months, the organisation has been involved in what amounts to the biggest disposal of property by a State body.
Tom Rochford, of the IDA, who is overseeing the disposals, says the response from their tenants has been excellent. To date, Pounds 18 million worth of property has been sold, representing one million square feet out of a total of 3.2 million. Agreement has been reached with tenants to buy 47 of the 109 units in that category. Discussions are ongoing on the remainder.
The buildings are 15 to 20 years old on average and have been well maintained. Mr Rochford said prices of around Pounds 25 per square foot are being achieved, although this varies slightly, depending on location. Property located in urban areas where the market is very strong - such as Galway, Cork, Limerick and Waterford - are commanding the best prices.
He attributed the good response to several factors. "The cost of borrowing is very cheap and purchasers can benefit from the tax breaks due to depreciation of the properties.
He said the IDA never took up the option of writing down the properties at a rate of about 3-4 per cent per year. "These can still be availed of and on a 15 to 20-year-old property can amount to a significant write-off," he said.
In many cases, when people are offered the chance to buy the property, they opt to do so, because "they feel they might want to be masters of their own destiny".
Mr Rochford said the IDA would not sell if it did not get its price.
"In September, we will have to decide what to do with these buildings. If tenants don't want to buy, we will have to decide how to put the properties into the market in a clear and transparent way.
He said the IDA had some very valuable properties. However, in disposing of them, the organisation "doesn't want to mess around with the market either".
The decision to put the properties on the market was taken last year by the last government in a change of policy, following a report it commissioned from the Jones Lang Wootton estate agency.
Mr Rochford said all the properties are let at current market rents on full FRI leases, generally of 25 years with five-yearly rent reviews.
He said if tenants do not agree to buy the properties and they are then sold on to a third party, those tenants will by covered by normal landlord and tenant legislation.
"All existing agreements will have to be maintained," he said.
The IDA has now contacted the occupiers of its properties under 7,500 square feet. This represents around 500,000 square feet, comprising 256 units. These will be more difficult to sell, he admits, because they are multi-tenanted in many cases.
At present, vacant IDA space amounts to around 800,000 square feet. Of this, 500,000 square feet has been reserved for new projects, which given the IDA's record performance in the last three years will not be long filling up.
This leaves about 300,000 square feet, the lowest vacancy rate in the IDA's history, according to Mr Rochford, who is confident tenants will be found for this space.
He believes about 65 to 70 per cent of the IDA's property portfolio will be sold off. After that, the company will have to administer the properties themselves.
It is understood virtually no property in Dublin has been sold to date. Mr Rochford said the new IDA policy was to leave construction to private developers - sometimes helped by the agency through under-writing the rent while the developer searched for a tenant.
The agency recently ran advertisements seeking people to build advance properties and now has a full panel of potential investors. Some will build factories using BES schemes.
The agency has also been rationalising its landbank, which is located all over the country. To date, it has done deals involving swapping 300 acres with local authorities in order to assemble more suitable sites.
"If we can't swap the rest, then we will have to dispose of it by the best means possible, which may include putting it out to tender," said Mr Rochford.
Overall, the IDA is pleased with progress so far. "We've managed to swap land and dispose of one million square feet of buildings in the last nine months without upsetting the market - that takes some juggling," said Mr Rochford.
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