Ireland’s fastest growing property pension fund IPUT has shelled out a further €63 million in the past week on two high-quality Dublin office blocks in the expectation that office rents will rise significantly in the coming months.
The fund has paid €50 million for Facebook’s current European headquarters at Hanover Reach in the south Dublin docklands only weeks before the social network company relocates to a substantially larger block at 4 Grand Canal Square. IPUT has also paid €13 million for a high-profile modern building at the junction of St Stephen’s Green and Hume Street.
IPUT's acquisition of Hanover Reach, a six-year-old building extending to about 6,038sq m (65,000sq ft) and owned by Ellier Developments, will come as a surprise to the investment market because Irish Life had been involved in lengthy negotiations in recent weeks to buy the block.
It was no surprise, however, that IPUT was in the wings, watching and waiting to see whether the deal would be completed.
Key site
For whatever reason, the two parties failed to reach agreement, giving IPUT the opportunity they sought to snap up the high-profile building. IPUT chief executive Niall Gaffney handled the negotiations for the pension fund, while Ellier was represented by Fergus O'Farrell of Savills.
Ellier can also be happy with the €50 million selling price, given that the development costs of the office block and 78 apartments – sold off at the top of the market – had been only €45 million.
Ellier, controlled by Chris Jones and Francis Rattigan, may well spend the profits on developing another approved office block of about 11,148sq m (120,000sq ft) on a key site at Lad Lane it acquired a number of years ago from the Office of Public Works.
Facebook is paying a rent of about €376 per sq m (€35 per sq ft) for Hanover Reach which it is due to vacate around the middle of July. IPUT will obviously be hoping to capitalise on the Facebook cache and do considerably better with the rent next time round – seeking in excess of €484 per s q m (€45 per sq ft), given the shortage of large volumes of Grade A space in the sought-after south Dublin docklands.
Facebook is thought to have agreed to a rent more than 18 months ago of about €322 per sq m (€30 per sq ft) for about 11,148sq m (120,000sq ft) in 4 Grand Canal Square, which is located beside the Bord Gáis Energy Theatre. An adjoining block, number 5, with a similar volume of space has already been targeted by a handful of leading companies.
IPUT’s acquisition of the two Dublin office blocks earlier this month will bring to €370 million the fund’s overall spend in the Dublin office market in the past year. In the run-up to Christmas, it spent €143 million on two office investments in the docklands.
The fund reported returns last year of more than 16 per cent on its €800 million-plus property portfolio.
