Just who is buying up Dublin?
Foreign buyers scramble to snap up prime assets in the capital
Kennedy Wilson - AmericaLed by Bill McMorrow, Kennedy Wilson is leading the investors’ buying spree of Dublin commercial property. Its €306 million deal this week for the Opera/Castle Market Holdings portfolio includes the Bank of Ireland building on Mespil Road in Dublin 4. It also owns a stake in the bank itself. Other purchases include the State Street building in the docklands for €108 million, the Gasworks apartment complex in D4 for €84 million, and the Clancy Quay development near Phoenix Park for €40 million.
London & Regional - Britain Run by the notoriously secretive brothers, Ian and Richard Livingstone, who both live in mansions near London’s Regents Park. It paid €20 million for the Eircom building in Citywest, as well as €15 million for th eFour Seasons hotel in Ballsbridge, D4 (above).
Igal Ahouvi - Israel An avid art collector, the billionaire Ahouvi has also been collecting small-scale Irish retail assets shunned by bigger investors. He has spent baout 100 million so far in Ireland, with assets including Aldi stores in Sandyford and Parnell Street (above), as well as a shoe shop on Henry Street.
King Street Capital - America The $20 billion hedge fund was founded by Brian Higgins and Francis Biondi Jr. Earlier this year, it bought Bishop’s Square (above), the Irish home of Rupert Murdoch’s News International for €65 million.
Northwood Investors - America Founded by John Kukral, Blackstone’s former property chief, Northwood bought Bord Gais’ headquarters at One Warrington Place for €27 million (above). It was an underbidder for several large sales, including the Opera portfolio.
Blackstone - America One of the world’s largest investment firms, headewd up by Stephen Schwarzman. It paid €67 million for the Burlington hotel on Leeson Street (above). It is planning more property acquisitions here, to add to investments in other sectors, such as its near 20 per cent stake in Eircom.
Dublin, according to Russell Jewell of AEW private equity, is at the centre of a commercial property “feeding frenzy” of international buyers.
Among those taking a bite this week were Kennedy Wilson, which closed a tasty €306 million deal for a Treasury Holdings portfolio, and CapREIT, a Canadian fund that paid €40 million for four city apartment blocks.
With analysts predicting that commercial property deals will top €1.2 billion in 2013, the capital is in the midst of an Indian summer of activity, after the nuclear winter of the crash.
A veritable United Nations of investors has descended upon Dublin over the last 18 months, from America, Britain, Germany, Israel, Canada and beyond.
Who and what is driving this frenzied bidding for Dublin commercial property? And after everything that has happened since 2008, are these people mad?
Not so, say consultants. Figures from property agencies show that sales volumes are on the increase, prices are starting to creep upwards, yields are beginning to shrink, and supply is getting tighter.
Jones Lang la Salle (JLLS) counted 47 transactions in the first half of the year with a value of €613 million, about 95 per cent in Dublin. CBRE counted €603 million in 34 deals of over €1 million. The total for all of 2012 was about €560 million.
“Investor demand remains focused on large-scale prime office and residential buildings in core Dublin locations. We expect to see an uplift in values, with the first signs of increases for large Dublin 2 office blocks,” said Hannah Dwyer, head of research at JLLS. “We have also started to see a tightening of yields for prime offices and prime retail assets.”
Portfolios of assets
Dwyer said JLLS is aware of “about €6 billion of capital” available to spend on the Irish market, mainly in Dublin. About 75 per cent of this, she said, is from abroad. “Opportunistic, private equity purchasers have now been joined by institutional capital, which deepens the range of interest.”
CBRE, which helped advise CapREIT on its apartment blocks this week, said big institutional buyers have been held back by a shortage of large portfolios of assets.
Apart from Kennedy Wilson’s Opera portfolio and the Project Aspen loans bought by an American consortium, few large-scale property collections have hit the Irish market, with Nama controlling supply.
“There are big foreign institutions around, but the challenge is to get their hands on portfolios. They don’t want to have to assemble them over time,” said CBRE’s Marie Hunt.
“The question for Nama is does it sell big portfolios of loans or just sell off the assets? There is such a weight of capital, it just wants the best price. For Nama, it is often better to sell assets individually.”
Hunt expects change on this front later in the year. Brendan McDonagh, Nama’s chief executive, also indicated as such in a presentation to Property Industry Ireland last month.
“It would have made no sense to have saturated the market, [but] we are not warehousing properties,” he said. “As the economy picks up and finance becomes available we will increase the flow of property to the market.”
The Central Park portfolio in Leopardstown, which could fetch €200 million, is rumoured to be up for sale in the autumn, while Danske bank is also thought to be readying assets for the market. On past form, Kennedy Wilson will among the favourites to snap them up. If there has been a feeding frenzy, the American investor has gorged on the lion’s share.
Former Bank of Ireland executive Peter Collins heads up Kennedy Wilson’s European office in Dublin. It has focused mainly on office blocks and residential developments. Its quarry has included KPMG’s Stephen’s Green base, State Street’s European headquarters, and a sprawling apartment development in the old Clancy barracks on the Liffey. Its Dublin property spree has topped €500 million so far.
London & Regional, run by two reclusive British brothers, is rumoured to have been underbidder to Kennedy Wilson on a number of deals. It has also managed to bag its own pair of sought-after properties, spending a combined €35 million on Eircom’s Citywest building and the Four Seasons hotel in Ballsbridge.
Northwood Investors, an American firm, was also pipped by Kennedy Wilson to the Opera portfolio. It is thought to have bid higher than the victor, but the vendors went for Kennedy. Northwood remains active, however, and paid €27 million for the Grand Canal-side headquarters of Bord Gáis.
Blackstone, the big daddy of US investment firms, has run the rule over a cacophony of Irish asset. It has so far only snapped up the Burlington hotel, however, for which it paid €67 million. It will spend a further €15 million renovating the property.
Splash of colour
Another investment firm to have targeted the Dublin market is King Street Capital, which paid €65 million for the Bernard McNamara-developed Bishop’s Square complex, housing News International and a number of government agencies and departments. The development, built in the late 1990s, weakened the power of the bricklayers’ unions by being the first to use cheaper fake-brick cladding on the front of the building.
German funds, characteristically flying below the radar, have also been extremely active and have snaffled about 10 per cent of the Dublin investment market in recent times. GLL paid about €40 million for 102-104 Grafton Street, home to River Island and Wallis, while AM Alpha paid €35 million for the Riverside II building on the docks.
Individual investors have also brought a splash of colour. John Malone, America’s biggest private landowner and the chairman of UPC-owner Liberty Global, recently bought the Trinity Capital hotel on Pearse Street, while Israeli billionaire Igal Ahouvi has snapped up assorted small retail outlets. Neville Isdell, the former chief executive of Coca Cola, evidently thought Dublin was the real thing by paying €10 million for the CHQ building, while Russian investor Elena Baturina paid €22 million for the hip Morrison hotel.
“The Irish have come to terms with the economic crisis; you understood exactly the essence of it and you have turned a corner and that’s why it is an attractive market,” Baturina told The Irish Times.
“The market for hotels in Ireland is very good. Nama has been very influential. My team is continuing to look closely at the market, cooperating with Nama and with others, and there are a few specific prospects under consideration.”
Tax efficient real estate investment trusts (REITs), such as the recently lunched Green Property REIT, may add more spice to the market in coming months. Mark Daly is head of property investment at Investec, which also advised CapREIT on its purchase last week.
Daly says that while things are heating up again in Dublin commercial property, the old days of capital speculation are a distant memory. Income, he says, is now the name of the game. “The smart money from overseas likes to be paid while it is waiting for a recovery,” he said. “Now, it’s all about the income. Capital growth is only the potential upside.”
Investors, he said, can get an average yield in Dublin that may be 2 percentage points more than prime cities such as London or Paris. “Dublin prices should always be at a discount to those places, true. But if you can get 7 per cent in Dublin, why wouldn’t you take that over the 5 per cent or less you’ll get in London?”
Investors, meanwhile, will be hoping that after the feeding frenzy, they won’t have to go hungry once again.