Telecom fund agrees to finance Sweepstakes £21m block

Telecom Eireann Pension Fund has agreed in principle to pre-fund the development of the next office block at the Sweepstakes Centre at Merrion Road in Ballsbridge, Dublin 4, at a cost of £21 million. The yield of almost 6 per cent will be the lowest in the city for a prime office investment.

Eagle Star leased the first block when the office market was in the doldrums. The vacancy rate at that stage was more than 13 per cent, a figure that has now fallen to slightly over 3 per cent. Eagle Star's original rent of £16.60 per sq ft is now likely to be increased to £22 per sq ft under a rent review due to get under way shortly.

The same pension also owns the first block in the centre, which is occupied by Eagle Star. It bought the 36,000 sq ft building in 1992 for £9 million, which initially produced a yield of over 7 per cent.

Irwin Druker of Druker Fanning is advising the fund and Pat McCormack of Palmer McCormack is acting for the developers, Ryde (Ireland) Ltd.

It is understood three pension funds competed to finance the development. One of them is thought to have been Guinness Pension Fund.

The latest building, which will have 59,000 sq ft, will be ready for fit out in the autumn. There will be 70 car-parking spaces at basement level. While the fund would prefer to let the building to a single tenant, it will just as easily settle for multiple lettings. Rents are likely to be £22 per sq ft and £1,500 for car-park spaces. With several major international companies looking for office accommodation in Dublin, the Sweepstakes Centre will inevitably be on their short list because of the superb location, high-quality specification planned for the block and the immense shortage of top quality space. Eagle Star leased the first block when the office market was in the doldrums. The vacancy rate at that stage was more than 13 per cent, a figure that has now fallen to slightly over 3 per cent. Eagle Star's original rent of £16.60 per sq ft is now likely to be increased to £22 per sq ft under a rent review due to get under way shortly.

The Telecom fund has a strong office portfolio in Dublin including Number 1 Adelaide Road, a 70,000 sq ft building let to AIB and worth around £20 million; the Gaiety Centre, a 53,000 sq ft block in South King Street let to Telecom Eireann and valued around £17 million and Canada Life House, a 27,000 sq ft building in Blackrock which is worth around £6 million.

Telecom Eireann Pension Fund is the second fund to finance an office development in Ballsbridge in recent months. The ESB Superannuation Fund has committed £12.5 million to financing the first two blocks of 55,000 sq ft on the G & T Crampton site at Lansdowne Road.