JACK FAGAN
Commercial Property Editor
Hibernia REIT is to acquire a substantial office investment in Dublin’s International Financial Services Centre for €47 million.
The real estate investment trust will generate a return next year of around 5.93 per cent from the off-market purchase of New Century House, a Grade A office building which is let to Bank of Ireland Group on a long-term lease.
The six-storey over-basement building on Mayor Street dates from 1999 and has a net internal floor area of 7,432sq m (80,000sq ft) as well as basement car parking for 87 cars.
The lease runs until 2024 with an upward only rent review in 2019.
Bank of Ireland is to undertake upgrades and improvements which are expected to further enhance the value of the building.
The annual headline rent of €2.85 million is to resume in full in October, 2015, following the expiry of the current partial rent abatement period.
From that stage onwards the investment will generate a yield of about 5.93 per cent.
The new owners are also expecting further growth from the rent review in 2019.
New Century House was sold last year for around €30 million with the disadvantage of a lease break in 2016. That condition has since been removed following negotiations between the bank and the American purchaser, Madison International. The bank has also made a commitment to carry out improvements to the block.
The acquisition breaks back to €53.88 per sq m (€580 per sq ft) which is below the €63.63 per sq m (€685 per sq ft) recently paid by the IPUT pension fund for Riverside 2 in the nearby south docklands. The price is also fairly similar to the €50.63 per sq m (€545 per sq ft) paid by Green REIT for the EBS head office on Burlington Road.
Incidentally, Google paid €57.78 per sq m (€622 per sq ft) for their 8,964sq m (96,500sq ft) office block at 1 Grand Mill on Barrow Street, Dublin 4.
The IFSC purchase is the second acquisition by Hibernia since its flotation in December, 2013, when it raised funds of €380 million.
Last month it spent €67 million on the purchase of a mixed portfolio of residential and commercial properties including 200 unfinished apartments in Dundrum which will give an extra uplift as they are built out.
In the longer term, Hibernia is planning to assemble a collage of properties from the growing supply of quality investments going for sale.
With the property market also benefiting from increasing confidence, deals are being turned relatively quickly and off-market activity is growing rapidly.
Kevin Nowlan, chief executive officer of WK Nowlan REIT Management Ltd, said their stated objective was to build a balanced portfolio of primarily Dublin-based commercial assets, delivering excellent returns for shareholders. New Century House, their first office acquisition, enjoyed an excellent location, offered a strong rental income and had the potential to deliver growth in both rental income and asset value as the market continues to recover.
