Gateway to the IFSC to go for €34.5m

An American securities and derivatives trading company based in Dublin's IFSC is about to buy the former AIB treasury building, one of the three original office blocks at the front of the financial services centre. Susquehanna International Group (SIG) has agreed to pay in the region of €34.5 million for the high profile block which will be extensively upgraded before being launched as the company's European headquarters.

SIG did not respond to a query from The Irish Times yesterday.

The off-market deal, due to be concluded later this month, comes at a time of renewed interest in IFSC office stock as a result of a 50 per cent-plus fall in values and the expectation that rents will shortly bounce back because of the shortage of high-volume space.

SIG’s interest in the block goes back to the early part of this year when it originally agreed to lease 4,645sq m (50,000sq ft) on the top three floors after AIB announced that it would be availing of a break clause in its lease to transfer the last of its treasury staff to the Bankcentre in Ballsbridge.

One of the conditions of the SIG leasing deal was that the owners – a 10 man syndicate originally assembled by Warren Private – would carry out an extensive internal refurbishment which had been costed at between €8 and €10 million. Part of the funding had been expected to come from a sinking fund with savings of €6.5 million.

For one reason or another, the remedial work was never carried out and it is now expected that this task will fall to SIG as soon as it takes possession of the 9,390sq m (100,000sq ft) block. The company may let part of the five-storey building on short leases until it grows into the space.

In the meantime, AIB is expected to take a severe hit on the building which it funded for the 10-strong syndicate in 2003 with non-recourse loans to support a purchase price of €78 million.

The bank refinanced the building again during the 2007 property boom when it was valued at over €100 million. The €34.5 million selling price represents a drop of 56 per cent on the €78 million valuation and an even steeper fall of 65.5 per cent on the €100 million valuation.

The international researcher IPD has reported office values in Dublin city down by 64 per cent since the peak.

The 2003 sale of the treasury building led to consternation in the investment market when the then minister for finance Charlie Mc Creevy intervened at short notice to block a range of tax breaks worth almost €26 million going to the purchasers. His peremptory strike was all the more surprising because two years earlier another business syndicate was allowed to avail of almost €48 million in capital allowances when it bought an adjoining Bank of Ireland building, La Touche House, for over €82.5 million.

Interestingly, that same investment was sold again last May by the original 62 Irish investors for a mere €35 million million – a drop of 57 per cent. It is currently producing a rental income of €4.3 million, giving its new owners – a Swiss fund – an initial return of no less than 12 per cent.