The EBS Building Society and a consortium of private investors are to fund an £85 million European headquarters building for Citibank at Dublin's International Financial Services Centre. EBS will have a stake of about 30 per cent in the £85 million building, while the balance will be held by a consortium of business and professional people.
There was intense competition for the investment because it will be the last major project in the docklands to qualify for full tax incentives. High income earners who have secured a majority stake in the 200,000 sq ft office block will be able to claim 100 per cent capital allowances on the development costs. Since last December's budget, private investors can now only claim up to £25,000 annually in capital allowances. The sale and lease-back deal was structured to allow those funding the development to claim the tax breaks and, in return, to make the office space available to Citibank at the lowest rent.
The private investors have apparently agreed to rent the space at around £14 per sq ft because of the significant tax shelter offered as they would be subject to tax at the top rate of 46 per cent.
The EBS, which pays corporation tax at 32 per cent rate, is likely to be getting around £18 per sq ft for its portion of the development.
Because it has been licensed to operate in the IFSC, Citibank will pay 10 per cent corporation tax. It will also be able to claim double rent allowances and a remission of rates. Rents in the docklands are generally around £27.50 per sq ft. Ownership of the block will revert to Citibank after 13 years. Although the terms of the deal have been agreed, formal contracts are not expected to be signed until the end of April. Roland O'Connell of Hamilton Osborne King confirmed yesterday that terms had been agreed but refused to give details.
The four interlinking blocks to be occupied by the bank are expected to take up to 18 months to complete.
Citibank's decision to proceed with its new European administration HQ will provide a major boost for the extension to the IFSC. Citibank paid about £16 million for its two-acre site in the IFSC. The bank already employs 550 people in its "back office" operation in Dublin. It is continuing to recruit staff despite a shortage of office space at the former Bord na Mona building and Fleming House in Baggot Street.
