A private investor will get a return of 5.2%  on Aviation House, a six-storey block  with redevelopment potential, writes Jack Fagan. 

IRISH Pension Unit Trust has managed to offload a 27-year-old office investment at Burgh Quay, Dublin 2 despite the much reduced level of investment activity because of international liquidity problems.

A private investor has paid €17.8 million for Aviation House, a six-storey block with redevelopment potential, in a deal that will show a net return of 5.2 per cent.

Jones Lang LaSalle originally sought €22 million - equating to a net yield of 4.28 per cent - for Aviation House and despite the banking crisis, several parties showed interest in it but not at that price level.

Earlier this summer, a private investor bid €18 million for the building but later discovered that he was not in a position to proceed because of the ever worsening credit squeeze.

"At that stage," says Niall Gaffney, chief executive of Irish Property Unit Trust, "we looked again at the valuation and with the market continuing to soften and the money supply getting tighter we decided to sell at over €17.8 million.

"As events have since shown, our decision has been vindicated. The sale helps us to deliver on our contractional commitment to invest in the Opera Avenue retail scheme in the centre of Cork."

Twelve months ago, Gaffney took a 35 per cent stake in the Cork scheme at a cost of around €70 million.

That project is being developed by O'Callaghan Properties on the site of the old Examiner printing works and, when completed in the autumn of 2009, will have 19 multi-storey shops with overhead apartments.

The overall retail area of 12,077sq m (130,000sq ft) is being aimed at British and European multiples. Top Shop, Zara and HM have apparently agreed to move into the new centre.

IPUT expects to get a return of 4 per cent once the shops are let. Opera Avenue will adjoin a department store of 13,935sq m (150,000sq ft) for Dunnes Store.

In Limerick, IPUT would probably consider offers on two well located shops which would provide yields of around 5 per cent for new owners.

The two retail investments on William Street are close to the Brown Thomas department store and are being offered for sale through Dublin agent HWBC.

Numbers 67 and 68 William Street comprise a modern end-of-terrace two-storey building with a combined 828.23sq m (8,915sq ft) of floor space and a service yard to the rear.

The ground floor shops have 218.51sq m (2,352sq ft) and 212.56sq m (2,288sq ft) and are occupied by Dixons and Sasha.

Dixons is understood to have agreed a new rent of around €220,000, backdated to October, 2006, while the rent on the Sasha shop is expected to rise from €191,500 to at least €215,000 in 2010.

Aviation House extends to 2,990sq m (32,184sq ft) and is rented by the Irish Aviation Authority, the government agency which controls air traffic and safety, under a lease which has another nine years to run.

The authority is paying an annual rent of €1.05 million, equating to €339 per sq m (€31.50 per sq ft) - low by comparison to other city centre offices.

The building has 21 car-parking spaces in the basement and, standing on a site of 0.223 of an acre, has obvious redevelopment potential.

Its location puts it with a few minutes' walk of both the Dart and the Luas transport systems.

The block also overlooks the 2.5-acre site of Hawkins House and Apollo House which will eventually be developed by Shelbourne Developments following its agreement with the Office of Public Works.

A master plan for the George's Quay area is currently being prepared by a firm of architects on behalf of the Dublin City Council.