A 50% stake in top docklands block for €50m

The Riverside IV complex, bought by Irish Life for €170m in 2006, is now valued at around €100m, writes JACK FAGAN

IRISH LIFE is to sell another office investment as a result of the recent upsurge in redemptions by retail investors at its unit linked funds. This time the company is seeking a buyer for a 50 per cent stake in the head office of leading solicitors Matheson Ormsby Prentice (MOPS) at Sir John Rogerson’s Quay in the south Dublin docklands.

The asking price of € 50 million will provide a net yield of 6.75 per cent – a long way ahead of the 3.75 per cent return originally agreed when Riverside IV was bought by Irish Life at the peak of the market in July, 2006. It paid €170 million for the block then but, based on the latest quoting price for half the investment, the overall valuation has now fallen to €100 million.

The decision to offload a significant portion of one of the best office investments held by the state’s largest property institution will take the market by surprise as it is already seeking buyers for three older office blocks in Dublin at the substantially reduced valuation of €40.8 million.

Commercial properties have been difficult to shift since early in 2008 because of declining capital values in the last two years and particularly in the 12 months up to the end of June when, according to researcher IPD, commercial property values generally dropped by a record 42.7 per cent.

With debt financing difficult to source in Ireland, Irish Life is hoping to find an overseas buyer for half of the MOPS building, possibly one of the German funds which have been active in the Irish market since yields moved out to close to 7 per cent for top properties.

A German fund manager, DekaBank, recently bought the Tommy Hilfiger store on Dublin’s Grafton Street for just over €24 million, giving it a return of 6.4 per cent. Several UK funds are also closely monitoring the Irish investment market because of the perception that it offers value.

John Moran of agent Jones Lang LaSalle is understood to be in detailed negotiations with an overseas fund on the possible sale of part of the MOPS investment.

The building was originally sold by developer Sean Dunne in part exchange for the Irish Life-owned Hume House next to his extensive hotel site in Ballsbridge. The MOPS block was valued at €170 million while the 7,432sq m (80,000sq ft) Hume House had a sale price of €130 million. The terms of the sale were recently at the centre of a Commercial Court dispute between agent CB Richard Ellis and Mr Dunne.

The seven-storey over basement MOPS building is part of a larger complex developed by Mr Dunne overlooking the Liffey at Sir John Rogerson’s Quay. MOPS pays an annual rent of over €7 million for the block which has 12,355sq m (133,000sq ft). There are 85 car-parking spaces in the basement rented annually at €4,500 each. The 25-year lease runs from March 2007, and provides for a break option in year 15.

Investors looking at the block may take the view that it is over rented. The rent at € 559 per sq m (€ 52 per sq ft) is ahead of the present prime rate which varies from €430 per sq m (€40 per sq ft) to €484 per sq m (€45 per sq ft). Rents tend to fluctuate in line with the state of the economy, the strength of the covenant and the terms of the inducement package offered to the tenant. Rents in high quality offices in the docklands like MOPS are likely to be among the first to recover when the economy bounces back.

Separately, Colm Luddy of CB Richard Ellis is seeking €40.8 million for three other Irish Life investments which will provide purchasers with yields ranging from 7–9 per cent.

A price of €19.5 million is being quoted for Hambleden House, an office building of 3,729sq m (40,140sq ft) at Lower Pembroke Street in Dublin 2. The agent is quoting €9 million for Wilson House, a 2,079sq m (22,382sq ft) office building on Fenian Street, Dublin 2. Also for sale at €12.3 million is an office block over the Merrion shopping centre in Dublin 4. It has a floor area of 2,415sq m (26,000sq ft).