Irish group buys Manhattan properties in $54m deal

IRISH INVESTMENT group Warren Private Clients (WPC) has availed of the slippage in the US property market and the favourable currency environment to buy two prime property investments in Manhattan for $54 million (€38 million). Both are in the exclusive SoHo submarket.

The properties at 413-415 west Broadway and 113 Spring Street are fully let and have retail on the ground floors and offices overhead. The overall equivalent yield is likely to end up at around 5.5 per cent.

The building on west Broadway extends to 3,280sq m (35,300sq ft) and has an impressive ground floor retail area let to Jamali, a high-end art gallery, and Oska, a well known fashion retailer. The Spring Street premises has a floor area of 1,718 sq m (18,500sq ft) and is anchored by MAC cosmetics, part of the Estée Lauder Group, who also occupy offices overhead.

The upper floors of the buildings are let to a mix of fashion designers, media, real estate and marketing companies. The west Broadway building also has two large residential loft apartments.

With retail rents in the two buildings running at $100 per square foot as against an open market rate of $325 to $400, the new owners can look forward to a much increased rental return. Similarly, office space let at between $25 and $30 per square foot is set to rise to about $60 per square foot on review over the next two years.

The two properties were sourced by WPC’s US joint venture partners, Willett Omstead, who previously lined up eight other investments for Warren. Last year the two companies sold a building in Greenwich, Connecticut, for $147.5 million having acquired it for $97.5 million in January, 2005. Investors received a return of 220 per cent on their original investment.

Last summer, WPC also bought another retail and office building in SoHo where the tenants include Burberry and Diesel. Enda Connolly, one of the founding directors of WPC, said they planned to focus on the SoHo location where there had been continuing growth over the last few years. With vacancy rates continually falling and now below 5 per cent they believed the two latest acquisitions would have huge reversionary value as the passing rents in both buildings were 40 per cent below current market rents.

Shortly before the banking crisis, Warren refinanced a number of its earlier property purchases, securing senior debt of more than €500 million at competitive terms. This allowed the company to return most, if not all, capital to its private investors.

Mr Connolly said that when the market was buoyant, the company allowed investors to either liquidate their investment or return their capital through refinancing. By availing of the second option, investors now had a free stake in their investments, thereby reducing any pressure to sell in the short or medium term.