Irish Life has paid about £9.3 million for the TSB Bank and the adjoining building at the bottom of Grafton Street, in Dublin 2. The investment properties are among five which have been sold by the Royal Liver Assurance Company for over £16 million. There was strong competition between institutions and private investors for the Grafton Street buildings because of their prestige value and the fact that investments rarely go for sale on the street.
Irish Life's aggressive tendering underlines a determination by the institutions to regain the top end of the investment market from the ever-growing private sector. The more vigorous strategy has been prompted by the need to find a home in the property market for substantial funds which have accumulated over the past few years. Royal Liver, which was advised by Druker Fanning and Partners, said the wide range of buyers tendering for the investments believed property was still a good buy with growth potential.
Irish Life will have a yield of just over 4.1 per cent on the Grafton Street investments, which are currently producing newly agreed rents of £415,000 per annum. Although TSB's lease on number 114 does not run out until 2019, it will be no great surprise if the bank eventually moves out of Grafton Street or at least cuts back its operation there. The sandstone building has over 2,500 sq ft of retail space on the ground floor and would be in keen demand from multiple traders if it comes on the market.
TSB also holds the lease on 115 Grafton Street but has sublet the ground floor to Spar at £100,000 per annum. The bank also plans to sublet the overhead office accommodation. The TSB headquarters is located in a large, modern office building in Blackrock. The 4.1 per cent yield on Grafton Street is not the lowest recorded on the street. At the end of 1998, the Irish Pension Fund Property Unit Trust accepted an initial yield of under 4 per cent when it bought the Nine West building at 83 Grafton Street for £3.6 million. In 1997, Burger King paid £3.4 million for its Grafton Street building in a deal which equated to 3.4 per cent yield.
Irish Life has also acquired for £1.3 million a third retail property from Royal Liver, the Golden Discs Store in 8 North Earl Street. The tenant is paying a rent of £48,000 per annum for the four-storey over basement corner building.
Royal Liver also secured close to £2 million from a private investor for three shops at 268 to 274 Lower Rathmines Road, which are let to a Burger King subsidiary at a rent of £102,500 per annum. The shops are sublet to McNally Opticians, First Active and Alan Hanna Books and will yield under 5 per cent.
The biggest surprise of the Royal Liver sale was the strong price of over £3 million secured for an office investment at 1 South Mall, in Cork city. The new owner, a Dublin-based developer, will have to settle for an initial yield of 4.25 per cent, easily the lowest for an office investment in Cork. The 18,000 sq ft building is currently producing rents of £155,000 from Royal Liver, PriceWaterhouse Coopers, R & H Hall and Royal Sun Alliance. Druker Fanning had been quoting a guide price of over £2 million for the block, where several rent reviews are to take place. PriceWaterhouse occupies over 6,000 sq ft at a rent of £52,000. The rent review is overdue.
Royal Liver continues to operate a large Dublin property portfolio which includes McDonalds on Grafton Street and Royal Liver Retail Park, off Naas Road.
