Microsoft to raise £50m in Irish sale and leaseback deal

The US computer company Microsoft is to embark on a sale and leaseback of its four large buildings in south Dublin. The exercise is expected to yield over £50 million in cash for the company.

Roderick Downer of Colliers Jackson-Stops will be handling the sale of the investment, one of the largest to come on the Irish property market in the past decade. Microsoft said yesterday that the process was in line with their global policy not to invest in real estate outside of their corporate headquarters in Redmond, USA.

"This has become global policy because the company does not want to be subject to the vagaries of fluctuating real estate prices and currencies around the world and the complex accounting and reporting this requires."

The company says it will receive a greater return on its investment by putting capital into its core business of developing, producing and distributing software rather than in real estate.

The Dublin buildings are the only ones owned by Microsoft worldwide. The company said it was committed to the Sandyford area and to its operations in Ireland and would lease back the building under long term leases.

The new leases are likely to provide for break clauses on a staggered basis.

The largest and most valuable of the company's premises is a 90,000 sq ft European Operations Centre in the IDA-owned South Co Dublin Business Park near Leopards town Racecourse. The three-year-old office building has one of the highest specifications in Dublin and stands on a site of about six acres which includes 280 car-parking spaces. The building and the parking spaces have an open market rental value equating to around £17 per sq ft. The investment is likely to be worth in excess of £21 million based on a nett yield of 6 per cent. The company also has an option to purchase an additional three acres in the same area to facilitate future expansion.

The other three buildings with a total of 225,000 sq ft form an integrated campus on a 12-acre site at Sandyford Industrial Estate. There is a higher than usual car-parking ratio, with 900 spaces on site, half of them in a multi-storey car-park. The complex is likely to be sold to a single investor for over £30 million.

Although the oldest of the three buildings dates from about 1985, it has been fitted out and maintained to a particularly high standard, like all Microsoft facilities. The rents for the three blocks, including car-parking facilities, are likely to be pitched between £11 and £17 per sq ft.

The two separate investments will probably be bought either by institutions or property companies looking to rebalance their portfolios.

Since its arrival in Ireland 14 years ago, Microsoft has become a major employer with 1,500 people on its payroll. Last September, the Minister for Enterprise, Trade and Employment, Mary Harney, opened two CD lines as part of a $24 million investment by the company in key infrastructure.