Facebook buildings jewels in €263.8m Dublin office portfolio

Assets are to be offered for sale in one lot or on an individual basis

In one of the highlights of the office investment market this year, property advisers CBRE and JLL are to offer for sale five Dublin office blocks including two exceptional buildings owned by Joe O'Reilly's Chartered Land and rented by Facebook at 4 and 5 Grand Canal Square.

Nama are to oversee the sale of the Tara Collection which has a guide price of €263.8 million.

Apart from the Daniel Libeskind-designed buildings at Grand Canal Square, the other assets going on the international market are Alexandra House in the Sweepstakes development in Ballsbridge; 86-88 Lower Leeson Street and One Grand Parade overlooking the Grand Canal in Dublin 6.

The collection will allow an investor to gain a significant foothold in Dublin’s prime office market.

The assets are to be offered for sale in one lot or on an individual basis.

They will be of interest to both Irish and overseas investment funds because of they stand to benefit from the limited supply of quality office accommodation available in the central business district and the strong recovery taking place in the Dublin office market generally.

The ongoing shortage has meant the pace of increase in office rents has accelerated and is expected to continue. The grade A office vacancy rate in the prime Dublin 2 and 3 districts is now at an all time low. The investment market is also breaking records with €3 billion of investments – apart altogether from loan sales – traded in the first three quarters of 2014.

With the Tara Collection extending to 33,000 sq m (356,000 sq ft) across all five properties the sale would allow a single buyer to acquire a major stake in the Dublin office market.

Top lots

The undoubted jewels in the crown are 4 and 5 Grand Canal Square which are described as “world class BREEAM rated buildings” – an endorsement based on the world’s foremost environmental assessment method and rating system for buildings.

The two blocks going for sale, along with a third which sold last year to Irish Life, were developed by Chartered Land which launched no less than 240,000sq m (2.6 million sq ft) of premier retail and office space in Dublin before the property crash.

Facebook rent both buildings under two separate leases, accommodating their Europe, Middle East and African headquarters and their largest Facebook presence outside the US. Both blocks are built to an exceptionally high standard incorporating full-height atriums and exceptional finishes throughout.

Number 4 extends to 11,417 sq m (122,894 sq ft) and is let to Facebook under a 15-year full repairing and insuring lease from January, 2014, at a passing rent of around €4.5 million per annum. The lease includes a break option after year 10 and the rent works out at €376 per sq m (€35 per sq ft).

Facebook has also recently agreed rental terms for the adjoining Number 5 under a 15-year lease with an option to break after 12 years.

The annual rent for the 11,857 sq m (127,628 sq ft) block of €5.99 million breaks back at 484 per sq m (€45 per sq ft). The rental term does not commence until May next to allow the building to be fitted out.

With the buildings available for sale separately, CBRE and JLL have set a guide price of €102.2 million for number 4 and €113.8 million for number 5.

At the current passing rent number 4 will show a net return of 4.22 per cent while number 5 will provide a yield of 5 per cent. These valuations are more than double the construction costs borne by Chartered Land which also, incidentally, owns Dundrum Town Centre.

Earlier this summer Irish Life paid €121 million for a larger but under-rented adjoining block extending to 13,842 sq m (149,000 sq ft) at an initial yield of 3.5 per cent. It was also sold by Chartered Land.

Alexandra House

Elsewhere CBRE and JLL are quoting €25 million for Alexandra House which was owned by a syndicate headed by the late

Liam Maye

, one of the shareholders in Dundrum Town Centre.

The 15-year-old block has a net internal area of 5,195 sq m (55,923 sq ft) and 90 car parking spaces. The ground, first and second floor extending to 2,706 s q m (29,129 s q ft) are let to The Sweepstakes Centre Ltd, trading as serviced office provider Regus, at an overall rent of €800,000 per annum. The lease commenced in June, 1999, and has around 10 years to run. The third, fourth and fifth floors with an additional 2,489 sq m (26,714 sq ft) of space could attract a top rent if refurbished. The €25 million selling price works out at €4,886 per sq m (€454 per sq ft). The immediate yield here will be 3.13 per cent with the prospect of substantially increasing the rent roll once the block is upgraded.

The joint agents are quoting €6.4 million for 86-88 Lower Leeson Street comprising a five-storey over basement modern office building behind a reproduction Georgian façade.

It is owned by investors Mark O'Brien, Robert McCarthy and Johnny Lombard. The block extends to 1,536 sq m (16,529 sq ft) and has planning permission to increase the floor area to 2,166 sq m (23,315 sq ft) and 26 car parking spaces.

Three of the floors are let at a rent of €168,702 under leases which are due to expire in June, 2016. The selling agents say new owners will have an opportunity to reconfigure and refurbish the building and increase the floor area. At a selling price of €6.4 m the price will work out at €4,165 per sq m (€387 per s q ft) on the existing floor area and €2,960 per sq m (€275 per sq ft) on the extended floor plate.

The final asset in the sale, One Grand Parade, owned by architect John Smyth, is being offered for sale at €16.4 million. The six-storey over basement Grade A block has a particularly high profile on the edge of the Grand Canal and a number of strong tenants including the cloud-based customer support software platform Zendesk International, Oasis Global Management Company (Ireland) and the Kuwaiti Embassy.

The building has a floor area of 2,929 sq m (31,534 sq ft) and 15 car parking spaces at basement level. It is finished to a particularly high standard with a full height atrium, raised access floors and air conditioning.

The ground floor area of 299 sq m (3,218 sq ft) is currently vacant but the building is still bringing in rents of €759,474 per annum. The price expected for the block works out at €5,597 per sq m (€520 per sq ft).

Johnny Horgan of CBRE and John Moran of JLL describes the portfolio as "the most significant to be brought to the market in 2014."

They said the Grand Canal Square combination of an international covenant coupled with spectacular office buildings offered an exceptional opportunity which was likely to appeal to a wide range of international and local investors while the remaining assets would be sought after by investors looking for value-added opportunities.

Jack Fagan

Jack Fagan

Jack Fagan is the former commercial-property editor of The Irish Times