IFSC office block sells for €40m off-market

Purchaser settles for net initial yield of 5.25% on BNP Paribas HQ in docklands

The BNP Paribas building at 5 George’s Dock in the IFSC, Dublin. Photograph: Alan Betson

Another of the original office buildings in Dublin’s International Financial Services Centre is about to be sold in an off-market deal for close to €40 million.

One of a number of Irish and overseas funds chasing the investment has agreed to buy George’s Dock 5 at a net initial yield of around 5.25 per cent. Reports that State Street may have been the successful bidder could not be confirmed.

Agent JLL is handling the sale on behalf of businessmen Martin Naughton and Loughlin Quinn who bought the investment in the mid 1990s for a figure reputed to have been around £20 million (€24 million).

Even more importantly they were able to avail of 100 per cent capital allowances over a 10-year period. Around the same time they also acquired the prominent Harbourmaster One office building close by which is rented by accountants KPMG.

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The ongoing sale will be the third office block developed by Hardwicke and British Land in George's Dock to change hands in the past year. Last November, IPUT bought George's Dock 6 with a floor area of 5,759sq m (62,000sq ft) for €20 million.

Last month, Irish Life picked up the partially occupied George's Dock 3 for €15.85 million. It has a floor area of 2,400sq m (25,833sq ft) over five levels.

The unusually strong demand for second-hand buildings in the IFSC also saw Hibernia REIT buy no fewer than four of them this year. It paid €47 million for New Century House where Bank of Ireland Group are tenants, and later went on to pay €90.75 million for two adjoining Grade A blocks, Guild House and Commerzbank House, which have a combined floor space of 13,400sq m (144,250sq ft).

A month later Hibernia forked out €37.8 million for The Forum building which dates from 2003 and has 4,376sq m of offices (47,109sq ft) as well as four floors of car-parking.

The six-storey George’s Dock 5 has an overall floor area of 5,388sq m (58,000sq ft) and is producing a rental income of around €2 million.

The new owners should have no difficulty in finding a tenant for one vacant floor given the pick up in demand for well located space in the IFSC.

Average rents in the block are around €301 per sq m (€28 per sq ft) and these would be expected to rise to at least €376 per sq m (€35 per sq ft) if the new owners decide to upgrade the building.

The investment bank BNP Paribas Ireland is the largest tenant in the block, occupying around 1,858sq m (20,000sq ft) on two floors on a lease that has another seven years to run. HEAnet, Ireland's national education and research network, occupy a single floor as does Ace Insurance while the other tenants include Arysta Health and Nutrition Sciences, IAWS and Fishburns Solicitors.

The renewed interest in the IFSC by investment funds was initially triggered by a fall off in capital values.

In the past year values in this and other central areas of the city have now risen by more than a third largely because of rental growth that is taking hold and set to continue for a considerable period. That prospect is unlikely to change until the construction industry gets into full swing once again.

Jack Fagan

Jack Fagan

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