Investment Portfolios: For the second week running, a €40million property investment portfolio has come on the market as another institution moves to cash in on the strong prices available, writes Jack Fagan, Property Editor
Royal Liver is selling three office blocks including Grattan House at Lower Mount Street, Dublin 2, an industrial unit at Willsborough near Blanchardstown, a retail unit occupied by Lifestyle Sports at Nutgrove Shopping Centre and another leased shop at North Earl Street.
All the investments are to be sold by tender on October 7th through Druker Fanning and Partners.
Further investments are to go for sale in the coming weeks as more institutions reduce their weightings in property now that the returns have fallen back from the unusually high levels of recent years. Attention has once again switched to the stock markets which have shown a modest recovery but are still not out of the woods.
The move by institutions to offload some of their older properties will be welcomed by private investors who were forced to turn their attention to the UK because of the lack of opportunities at home, the better returns available in Britain and also the significantly cheaper transaction charges there. The ready availability of finance here at the lowest interest rates for over 30 years is also an important ingredient in an investment market that is still likely to show returns of 6 to 8 per cent in the current year.
The four adjoining shops in Henry Street which went on sale a week ago have attracted considerable attention, not least from a few of the institutions anxious to upgrade the retail element of their portfolios. The odds are still on the shops being bought by a business syndicate at over €40 million.
The Royal Liver investments seem likely to be bought by high net worth individuals, including a number of housebuilders who have probably done exceptionally well out of the property boom of recent years.
Some of the guide prices issued by Druker Fanning may well prove on the conservative side, given that all the buildings are rented on long leases by strong covenants.
The highest guide price is €11.75million being sought for Grattan House, a 30-year old building at Lower Mount Street which is predominantly let to the Office of Public Works and the Irish Dairy Board at an overall rent of €915,950 per annum.
The OPW occupies 1,447 sq m (15,580 sq ft) and 40 car-parking spaces on four separate leases dating from 1972 and 1973 while the Irish Dairy Board rents 386.4 sq m (4,160sqft) on the third floor plus 10car-parking spaces at a rent of €190,000 per annum. Here again the 35-year lease dates from 1973. The overall average rent for the two tenants works out at €405 per sq m (€37.50 per sq ft).
The only short-term lease is that held by O2 Communications, which leases space on the roof of the building for a communications aerial at a rent of €15,250 per annum. A selling price of €11.75 m would produce a yield of 7 per cent.
Druker Fanning is quoting €5.7million for Block C at the Adelphi Centre in Dún Laoghaire which is rented by world-class healthcare company GlaxoSmithKline.
Here again a yield of 7 per cent could be achieved for the high quality 1,511sqm (16,265 sq ft) building which dates from 1992. It has been let to the company on a 35-year lease since then.
The present rent roll of €445,608 works out at €275 per sq m (€25.50persqft) and €1,000 for each of the 30 car-parking spaces.
Royal Liver is also seeking over €5million for a 1,483 sq m (15,970sqft) block at South County Business Park. It is let to Fujitsu Services Ltd under a 35-year lease from 1987 at a current rent of €400,000 per annum. The rent here equates to €210 per sq m (€19.50 per sq ft) and the next review is due in 2007. A selling price of €5 would equate to a yield of 6.8 per cent.
For investors looking for a smaller lot size there is the 2,999 sq m (32,281sqft) building at Willsborough Industrial Estate in Coolock, Dublin 17, let to Cara Data Processing Ltd. Here again a 35-year lease is in place since 1990 and the passing rent of €301,563 breaks back at just over €100 per sq m (€9.35persqft).
The freehold of the Lifestyle outlet in Nutgrove Shopping Centre in Rathfarnham is expected to make over €3 million. The 305 sq m (3,283sqft) unit is held on a 20-years-and-two-months lease from September, 1999, at a current rent of €120,625 per annum.
Druker Fanning has indicated that this figure will rise to around €170,000 when it is reviewed in September 2004. The present rent works out at €395persqm (€36.74 per sq ft).
The final lot going for sale, number 26 North Earl Street, is the type of property that has been much sought after in recent years by small investors. The building is let to Ann's bakery and restaurant on a 35- year-lease from 1990 at a rent of €120,625 per annum.
Given the huge interest in the nearby Golden Discs store investment before Christmas - it made a record price of €3.25 million - the Druker Fanning guide of €3 million may well prove to be very much on the low side. The next rent review is due in 2005.
