Naughton and Quinn make €40m profit on IFSC blocks

Another of the original tax-driven office buildings in Dublin’s International Financial Services Centre has been sold in an off-market deal.

Businessmen Martin Naughton and Lochlann Quinn have secured €50 million for Harbourmaster One only weeks after disposing of another IFSC block for close to €40 million.

The two transactions have yielded overall profits of around €40 million apart altogether from the 100 per cent capital allowances that they were able to avail of over a 10-year period after they made the original investments in the early 1990s.

Mr Naughton and Mr Quinn were among a relatively small number of individual investors who bought office blocks shortly after the launch of the IFSC. Many of the newly developed investment properties with tax breaks were acquired by large investment syndicates.

Harbourmaster One was originally bought for around £20.8 million (€26 million) while the second investment, George’s Dock 5, cost in the region of £20 million (€24 million).

Harbourmaster One has now been sold in a private transaction to Irish Life for €50 million. George's Dock 5 was acquired at the end of October by State Street for almost €40 million.

Mr Naughton, a billionaire industrialist, and Mr Quinn, chairman of the ESB, made a fortune from the global expansion of Glen Dimplex. Mr Quinn's 26 per cent stake in the business was sold in 2004 to Mr Naughton, the majority shareholder and founder of Glen Dimplex, now one of the largest manufacturers of heating and domestic appliances in the world.

KPMG block

The seven-storey Harbourmaster One extends to 5,768sq m (62,090sq ft) and is occupied by the professional services company KPMG under a 35-year lease which has another 11 years to run. The current rent of €3.05 million equates to €527 per sq m (€49 per sq ft) – slightly above the going rate – but with city centre rents, and particularly those in the IFSC, moving swiftly upwards because of a shortage of high quality buildings, Irish Life will be hoping to do even better in the years ahead.

As things stand, Irish Life will earn an initial return of 5.8 per cent on the office block and 53 basement car parking spaces.

Irish Life was advised by HWBC while Mr Naughton and Mr Quinn were represented by agents JLL.

State Street had to settle for a yield of 5.25 per cent when it bought George’s Dock 5, which has an overall floor area of 5,388sq m (58,000sq ft) and is producing a rental income of around €2 million.

The investment bank BNP Paribas Ireland is the largest tenant in the block, occupying around 1,858sq m (20,000sq ft) on a lease that has another seven years to run.

The sale of Harbourmaster One is the fifth office block developed by Hardwicke and British Land in George's Dock to change hands in little over a year.

IPUT started the buying frenzy with the purchase of the 5,759sq m (61,989sq ft) George’s Dock 6 for €20 million.

Then Irish Life picked up the partially occupied 2,400sq m (25,833sq ft) George’s Dock 3 for €15.85 million. The buying spree also saw Hibernia REIT buy no fewer than four blocks.

It paid €47million for the New Century House where Bank of Ireland Group are tenants and later went on to pay €90.75 million for two adjoining Grade A blocks, Guild House and Commerzbank House which have a combined floor space of 13,400sq m (144,236sq ft).

Hibernia subsequently returned to pick up the 4,376sq m (47,103sq ft) Forum Building for €37.8 million and in the run-up to Chrismas Ardstone Capital and CBRE Global Investment |Partners bought the 5,688sq m (61,225sq ft) 2 Harbourmaster Place for €37.85 million.

The renewed interest in the IFSC was initially triggered by a fall-off in capital values. Values have since risen by more than a third because of the rental growth that is under way.