Five commercial properties, including two modern Dublin office blocks and a retail building in Grafton Street, are expected to make in excess of £7 million when they are offered for sale next month by a pension fund.
The investments are to be sold by tender by Jones Lang Wootton in one or more lots, and are likely to appeal mainly to private investors.
The decision by the Construction Federation Executive Pension Fund to sell its entire property portfolio will inevitably heighten speculation on whether the investment market has peaked. There is increasing evidence of an oversupply of retail and industrial space in the Dublin region and with close to two million sq ft of offices planned for the Leopardstown area alone, it will not be long before this sector also begins to tail off.
Explaining its decision to sell its small portfolio, the Construction Federation said it would continue to hold property as an asset, and it would do this by reinvesting the proceeds in indirect property holdings.
Although the five properties all have strong covenants, the pension fund obviously decided that it was impracticable to manage a small portfolio producing an income of £384,500 per annum.
Irrespective of whether the market is slipping or not, there will be no shortage of interest in any of the five properties. Four of them are within the range of a huge number of private investors, who have had little opportunity of acquiring good commercial buildings in Dublin over the past year. The Marathon Sports building at 40 Grafton Street is the only one of the investments likely to attract the interest of the institutions. The 955 sq ft shop and basement are let to Marathon Sports at a rent of £100,000 - the equivalent of £175 per sq ft for zone A. An additional rent of £14,000 comes from the three upper floors. The building is expected to make at least £2.8 million, representing a yield of 4.1 per cent.
The lowest yield so far on the street was the 3.4 per cent set in the case of the Burger King building last September.
A 8,500 sq ft office building at 15/16 Dame Court let to Telecom Eireann at £62,000 is likely to fetch around £800,000. The lease runs until 2010 and the next rent review is due in September.
The largest building going for sale, Joyce House, at Lombard Street is occupied by the births and marriages registry office under a 35-year lease from 1982. The rent of £148,000 is due to be reviewed in 2001. The building is valued at around £2.2 million, equating to a yield of 7 per cent. Two Victorian office buildings also going for sale have equally good tenants. Number 4 Northbrook Road is occupied by the National Safety Council at a rent of £24,500. The 3,000 sq ft house, which is expected to make around £400,000, is held under a 35-year lease from 1984. The next rent review is due in 1999. The Association of Certified Accountants are the tenants in 9 Leeson Park, a 2,700 sq ft building with 20 car parking spaces. The current rent of £36,000 is expected to increase to around £45,000 when it is reviewed next September. A price of £650,000 would produce a yield of 6.3 per cent.
