Business Parks: A healthcare service provider, United Drug, is planning a distribution and office facility at Citywest. Jack Fagan, Property Editor, reports

Healthcare service provider United Drug plc is planning a sale and leaseback of a substantial distribution and office facility to be built shortly at Citywest in west Dublin.

Joint agents Lisney and CB Richard Ellis Gunne are pitching for an investor to pre-fund the buildings, suggesting that offers should be in excess of €39.5 million. That figure would produce a yield of 6.5 per cent.

The investment opportunity is most likely to be of interest to financial institutions and pension funds and more particularly private syndicates, who have had to look to the UK market in recent years for good commercial investments.

According to William Fennelly of Lisney, United Drug will be seen as a particularly strong covenant.

The company has experience a significant growth in turnover between 1998 and 2002, rising from €515 million to €974 million. It had a profit before tax in 2002 of over €28 million.

The new distribution and office buildings will be located on an eight-acre site acquired for around €4 million. It will adjoin another building used by United Drug.

The two stand-alone buildings about to be developed will comprise a distribution block extending to 18,994.61 sq m (204,458 sq ft) and a four-storey office building with a floor area of 4,563.4 sq m (49,120 sq ft).

United Drug is to take two separate leases of the buildings for 25 years from the expected completion date on January 2005. The leases will be on full repairing and insuring terms at an initial rent of €2,675,000 per annum.

There will be provision for five-yearly upwards only rent reviews with the first review capped at an increase of 15 per cent.

The remaining reviews will be upwards only from the reserved rent or the open market rental value, whichever is the greater.

The proposed rents equate to €102.25 per sq m (€9.50 per sq ft) for the distribution building and €160.60 per sq m (€14.92 per sqft) for the office block.

Investors interested in forward funding the complex will be invited to quote either for straight 25-year leases or alternatively for leases with a break option in year 15.

United Drug has already used a sale and leaseback arrangement to provide modern facilities in the past. The company was founded as a pharmaceutical wholesaler in the west of Ireland in 1948.

It has since grown organically and by acquisition to become one of the dominant players on both sides of the Irish border. United Drug was listed on the Dublin Stock Exchange in 1989 and has since developed into a much broader based healthcare service provider.