ESB pension fund in €140m deal with Tetrarch and Pimco

Pimco selling its interest in asset portfolio with Tetrarch remaining as investor

Irish investment group Tetrarch Capital and joint venture partner Pimco have agreed the sale of their Ulysses and Millennium Park office portfolio to the ESB pension scheme.

The sale price has not been disclosed but is believed to be more than €140 million. The annual rent roll from the portfolio is believed to be about €10 million.

The portfolio comprises six occupied properties in Dublin, and the same number at Millennium Park in Naas, Co Kildare.

This deal sees Pimco cashing in on its investment in the portfolio but Tetrarch will remain an investor.

The transaction is subject to the approval of the Competition and Consumer Protection Commission and is expected to be completed before Christmas. It was arranged by Merrion Capital and Leon Partners. Merrion Investment Managers will be the fund manager, with Tetrarch continuing as the investment adviser.

The portfolio includes six offices in Dublin 1, totalling 347,000 square feet. The buildings, previously connected with developer Liam Carroll, include the Garda Síochána Ombudsman Commission building on Capel Street, and Macken House on Mayor Street near the 3 Arena. There are also six offices totalling 142,000sq ft in Millennium Park, near the Dublin-Cork motorway.

Tetrarch and Pimco acquired the Ulysses portfolio, which comprised the Dublin offices, in late 2013 and the Millennium Park assets in July 2015.

The offices are 56 per cent let to Government tenants, while corporate tenants include Bulgari, Kerry Group and Version 1.

The new investment vehicle will be the Tetrarch Capital Commercial Real Estate Fund, a subfund of Tetrarch ICAV.

The ICAV's directors are James Byrne, director of asset management at Tetrarch; Brian Hall, finance and operations director of Merrion Investment Managers; and Sean O'Brien, development director of BAM Ireland and a former head of investments at real estate group CBRE.

No comment was available from either Tetrarch or the ESB defined-benefit pension fund.

ESB pensions

The ESB’s pension scheme is separate from the State company itself and overseen by trustees nominated by management and workers. Its latest annual report shows the scheme had a shortfall of €142 million at the end of last year.

However, this was on the basis of the minimum funding standard, which calculates a scheme’s liabilities as if it were being wound up. The report points out the company has already agreed a plan with the Pensions Authority to make up this shortfall by 2018.

The pension fund has been the subject of disputes between the ESB and its workers. In 2008, its actuarial deficit – the difference between future liabilities and income – was €1.96 billion. Following talks between management and unions, the group agreed in 2010 to put €591 million into the scheme, while a number of benefits were adjusted and the fund was shut to new members.

In 2013, a dispute over whether or not the company was liable for the fund’s €1.7 billion deficit led to a strike threat from the ESB group of unions. Workers argued that the scheme should be classed as defined benefit, making the company liable for the deficit, but management said that this was not the case.

The dispute was later settled and the ESB’s annual report classes the scheme as defined benefit.