FRIENDS Provident and a leading Irish pension fund are paying £6.3 million for two office investments at Richview Office Park in Clonskeagh, Dublin 4. Both deals will produce yields of around 7.5 per cent.
The pension fund has agreed purchase terms at £4.3 million for a 22,000-square-foot office block, which is under construction for US Robetics, one of the leading companies supplying modems for home computers. The firm will be paying a rent of £325,000 for the three-storey block - the equivalent of £13.50 per square foot and £400 per car-parking space. The 25-year lease provides for a break after 10 years. The company is due to take over the new building next September.
In the second transaction, Friends Provident is paying £2 million for an office block of 10,800 square feet, which is due to be completed next month. Eircell is to rent the building at £14 per square foot under a 25-year lease, which also has a break clause in the 10th year.
Last year, Friends Provident also bought another block of 8,000 square feet in Richview which is leased to Unidare at £13 per square foot. The assurance company paid £1.6 million for the building, which produces a yield of almost 8 per cent.
The three deals underline the increasing willingness of funds to acquire office investments, even where tenants are granted options to break their leases. Up to recent years, many institutions had warned they would not be prepared to acquire office buildings with break clauses. However, with only a limited number of strong investments on the market, funds have had to settle for buildings with break clauses.
The increasing demand for properties is in part being fuelled by the evidence that rents have returned to an upward path. Confidence - which ultimately drives commercial property rents and values - is stronger now than for many years.
When the two office buildings under construction in Richview come on stream, it will leave only one more block of 25,000 square feet to be completed in the park. The nearby Beech Hill Office Campus is also nearing completion with the remaining 60,000 square feet of space already booked by Ericsson and CBT Systems.
The former Jones Group headquarters which is located between Richview and Beech Hill is also to be redeveloped as an out-of-town office park. A consortium is shortly to seek planning permission for 140,000 square feet of offices on the six-acre site.
Sherry FitzGerald handled this week's sales at Richview while Jones Lang Wootton acted for the pension fund and Lisney represented Friends Provident.
