HSE office block for sale for €7.05m

An office investment for sale near the Phoenix Park will test the level of demand from investors

An office investment for sale near the Phoenix Park will test the level of demand from investors

A MODERN office investment rented by the Health Service Executive (HSE) near the entrance to the Phoenix Park at Parkgate Street, Dublin 8, is expected to test the level of demand from investors when it goes on the market today through Savills.

Michael Clarke of the selling agency is quoting a price of €7.05 million for the four-storey building which will provide a net return of 9.4 per cent after costs.

The sale comes shortly after the HSE headquarters at Millennium Park in Naas, Co Kildare, was sold for almost €9 million in a deal which will show a yield of 9 per cent. Also in the past week the Layden Group paid €9.25 million for an office building owned by the Swedish telecoms equipment maker Ericsson at Clonskeagh in Dublin 4.

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The signs of renewed activity in the Dublin investment market comes at a time when some of the main agents are reporting a pickup of inquiries from cash investors who were fortunate enough to have sold properties before the market crashed.

A number of receivers are due to bring development sites and buildings onto the market in the coming weeks.

There is also increasing speculation that Nama will shortly have to begin offloading some of the large number of commercial buildings with distressed loans for which the State asset manager has taken responsibility.

The most valuable properties are likely to be of interest mainly to overseas buyers with the support of European banks. However, large scale sales are unlikely until the Government clarifies whether new legislation planned for later this year will introduce downwards reviews in existing leases.

The HSE office block at Parkgate Street is being sold by KPMG receiver Kieran Wallace on behalf of ACC. It is one of four blocks in Parkgate Business Centre developed by a subsidiary of Michael Murphy’s South Dublin Construction.

The block is on the opposite side of the River Liffey from Heuston Station and close to the recently completed Criminal Courts complex.

Other occupiers in Parkgate Business Centre include the Railway Procurement Agency which rents 4,000sq m (43,056sq ft) in two buildings. The Royal Bank of Scotland is another high profile tenant.

The building going for sale – Block D – was constructed in 1996 and has a floor area of 1,830sq m (19,698sq ft) over four floors. It forms part of a larger block of two similar buildings and is served by two 10-passenger lifts.

The HSE has the use of 21 car parking spaces in the basement.

The block is let to the HSE on a 25-year full repairing and insuring lease from December 2001. The current rent of €715,000 per annum is due to be reviewed at the end of this year.

The HSE has a break option in the lease in November 2016, subject to 12 months’ notice and the payment of a full year’s rental penalty if exercised. The lease has a period of 6.7 years before the break option arises.

Michael Clarke said the sale would give an investor a very attractive cash-on-cash return with income secured by the HSE. The completion of the vast Criminal Courts had generated demand for office accommodation in the immediate area from members of the legal profession.

The HSE building in Naas, Oak House, was sold by agents Murphy Mulhall for property developers Tom Considine and Paddy Sweeney who paid over €300 million for the 370-acre Millennium Park at the height of the property boom in 2006.

Swords accountants Houlihan Cushnahan, acting for a group of investors, paid €8.99 million for Oak House which has a floor area of 3,716sq m (40,000sq ft). The rent of €880,000 per annum will show a return of 9.05 per cent. The lease has more than 16 years to run.

Michael Clarke advised the purchasers in this case.

Jack Fagan

Jack Fagan

Jack Fagan is the former commercial-property editor of The Irish Times