Docklands office block to test market

A FIVE-YEAR-OLD office block in the Dublin docklands which is going for sale this week with a guide price of over €35 million is expected to test the strength of the investment market.

If a buyer is found for Riverside II at Sir John Rogerson’s Quay in the south docklands area, several more high-value investments are likely to be offered for sale in the coming weeks.

Agents Knight Frank say their marketing campaign will be aimed at a small number of credible, well-funded parties who have the ability to acquire the block.

A number of Irish and UK institutions as well as range of overseas investors have been on the lookout for heavily discounted properties in Dublin, though the extremely tight lending conditions now being followed by the banks as well as the Government’s plans to abolish upward-only rent reviews on all existing leases have brought the market to a virtual standstill in recent months. Though commercial property values have fallen by around 60 per cent since the peak in the third quarter of 2007, there have been only four significant deals so far this year worth around €130 million. Riverside II has not escaped the slippage in values and was probably valued at over €60 million at the height of the market. It is jointly owned by the Elliott, Kelly, Flynn and McCormack families – all major players in the property market – who have all taken a severe drubbing through the collapse in values.

The 1.1 acre site for Riverside II, bought in 2004 for €25 million, also included space for 124 apartments which were built and sold.

Funding for the office block was provided by Bank of Scotland (Ireland), now part of the Lloyds Banking Group. However, the four families involved in the Riverside II Investment Partnership insisted this week that it was not a distressed sale and that they were “under no pressure from the bank to accept a price below €35 million”. They said they had been working cooperatively with their bank and as they were under no pressure to sell they saw their role now as helping the bank to recoup as much of its lending as possible.

Ciara Horgan of Knight Frank said they expected strong local and overseas interest in the building because “nothing of this calibre has hit the market for more than four years”. The seven-storey block fronts directly on to the river Liffey at Sir John Rogerson’s Quay and extends to 6,784sq m (73,022sq ft). There are 41 car parking spaces in the basement.

Even at a price of €35 million, Riverside II will provide an initial return of 8.43 per cent – easily the highest yield yet offered for a prime office block in the city centre. The current rent roll of €3.2 million equates to a rent of €452 per sq m (€42 per sq ft). Rents for similar accommodation have dropped well below that level over the past year but with virtually no new city developments in the pipeline a recovery in rents will come in due course.

The office space in Riverside II is shared by the Bank of New York Mellon and solicitors Beauchamps. The bank lease on 4,243sq m (45,671sq ft) runs until 2027 while the other lease, covering 2,540sq m (27,340sq ft), expires in 2026. Both tenants have break options in 2021. They currently sub-let 1,393sq m (14,994sq ft) of the overall space.

BNY Mellon is known to be looking for a Dublin headquarters of up to 18,580sq m (200,000sq ft) to replace other offices in the city.