Turnover could reach levels last seen in 2007

Overseas buyers main driver behind rush to cash in on ‘distressed’ assets

Central Park: sale of office and residential investment likely to be one of the highlights of the year

Central Park: sale of office and residential investment likely to be one of the highlights of the year

 

Five years after the property market was brought to its knees, trading is once again characterised by a similar splurge of money as during the property boom.

By year end turnover in the commercial market is expected to reach €1.8 billion – the highest spend since 2007 when the figure hit €1.9 billion. There the similarity ends.

With the rampant demand for loan books and individual investments, the entire market has been reconfigured and revalued.

Prices in some instances have been cut by two-thirds. The players too have changed.

The big spenders in the halcyon years are now frequently the reluctant sellers, pushed to the front line by bankers, receivers and, of course, Nama.

Ownership of a great many commercial and multi-family properties in the Dublin area have already passed to American and UK funds.

And with an increased number of distressed assets due to be rolled out in loan books as well as in direct sales early in the new year – not to mention what some vendors like to portray as “consensual sales” with the agreement of their bankers – there will be no easing of the rush by overseas buyers to cash in on Ireland’s financial crisis.

Even in the run-up to Christmas the funds are weighing up the pros and cons of two high-value property portfolios, one of them Central Park in Leopardstown which is expected to fetch about €250 million.

The other is the Platinum Collection which features three high-quality office buildings in Dublin’s south docklands (two of them being eagerly sought by Irish Life and the other by Google) and another in Ballsbridge with an overall price guide of €120 million.

Top price
Those valuations are well short of the top price of €306 million already paid by US investor Kennedy Wilson for 16 properties in the Opera Portfolio including Stillorgan shopping centre, the new Bank of Ireland HQ on Mespil Road in Dublin 4 and KPMG’s offices on St Stephen’s Green.

The same Beverley Hills-based investor has spent the guts of €1 billion on a range of distressed properties including State Street Bank building in the city’s docklands (€108 million), Clancy Barracks residential complex (€82 million), the Gasworks apartments in Ringsend (€40 million), Sandford apartments (€27million) , Project Prince (€61 million), 50 per cent stake in Brooklawn House, Shelbourne Road, Ballsbridge (€13.5 million) and Alto Vetro, Dublin’s new landmark residential tower in George’s Dock (€11.5 million).

The diversity and scale of the newly acquired properties means that Kennedy Wilson is now one if the biggest landlords in the country along with Nama, Irish Life and IPUT.

Its residential portfolio alone has reached almost 800 apartments. And the indications are the buying spree will continue.

Even if the company was to take a break, another US investor Hines is reported to be in the process of buying a 73 per cent stake in Liffey Valley shopping centre in west Dublin for about €250 million. The same company is rumoured to be about to spend almost as much again on other property investments in Dublin.

If that turns out to be true, then the overall turnover will exceed €2 billion by year end.

Marion Finnegan, chief economist with DTZ Sherry FitzGerald, said that with just under 80 per cent of the international capital invested here over the past year coming from the US it was a very interesting reflection on how Ireland was viewed in the US.

In fact overseas investors accounted for 52 per cent of the overall spend this year with the balance of 48 per cent coming mainly from the newly launched Green REIT as well as IPUT and Irish Life.

The more recent launch of Hibernia REIT on the Dublin and London stock exchanges is expected to bolster the Irish buying power when the new selling season gets under way.

Like a number of other funds, Green REIT has set its sights on Central Park, the largest single property asset to be offered for sale by Nama.

To help it gain control of this huge stand-alone development, it is likely to be joined on this occasion by Kennedy Wilson and if successful, the American company will probably end up with the residential element-272 apartments and a partially-built block with another 166 homes.

Private investors
The increasing number of private investors pitching for investments under €10 million will be encouraged by the findings of researcher IPD that capital values increased by 2.3 per cent in the first nine months of the year – the first positive return since 2007.

The ongoing recovery will also help the sale of a landmark office and retail building at the junction of Dawson Street and Molesworth Street which has been held up by an in-house technical problem believed to relate to a VAT issue.

Patrick Curran of agents BNPPRE has reported strong interest in what is probably the best redevelopment opportunity in the city centre.

It has a guide price of over €15 million.

A range of banks and receivers – notably Ulster Bank, Danske Bank and Bank of Scotland (Ireland) – are gearing up to offload a large number of investment properties in the new year.

Nama will also be getting in on the act with possibly as much as €500 million worth of distressed assets.

Companies like Lone Star which bought a substantial portfolio at a nominal value will continue to break it up and sell on individual lots at a profit.

Other funds will be attempting to do the same thing.

Lisney estimates that with the total demand now standing at close to €10 billion there is little chance of it being satisfied. As pricing strengthens, some of the funds will move on to other international markets that are in earlier stages of the recovery cycle However, there will still be a lot to play for in the Irish market.