A new benchmark yield for an office investment may well be set next month when the newly completed Embassy House beside the Herbert Park Hotel in Ballsbridge, Dublin 4, is offered for sale by the developers, Sheelin McSharry. Agents Jones Lang Wootton are likely to secure in excess of £20 million for the part six-storey block overlooking the RDS, which has just under 50,000 sq ft of space and 45 on-site car parking spaces.
It is currently producing a rent roll of £1.127 million from a mixture of tenants including Computer Associates, Cablelink, PA Consulting, Enterprise Oil, General Accident Life and solicitors Dockrell Farrell.
Tony O'Loughlin of the selling agents says Embassy House led the Dublin office rental market during 1998 and at each stage of the letting campaign, has secured record rents.
The first tenants, Cablelink, signed up at rents of £20 per sq ft, but rents continued to rise throughout the marketing campaign and finished up at £27.50 - probably the highest outside the International Financial Services Centre.
While the developers would have had little difficulty in letting the building to a single tenant, they decided instead to pitch for a mixture of high-profile companies - a policy that is likely to be followed by other developers in key locations.
In fact, Ballymore Properties did the very same thing a few years ago when it redeveloped Huguenot House on St Stephen's Green.
Embassy House is let in relatively small sized, high quality suites which should ensure that rental income will be maximised in the various reviews over the years.
Though the first rent review is not due for 41/2 years, Tony O'Loughlin maintains that there is already a reversionary element to the deal.
New office developments due to come on stream within the next year are being widely quoted at rents ranging from £22 to £25 per sq ft for large areas of space. No one doubts that these rent levels will be achieved given the extreme shortage of new space in the city and the number of companies seeking substantial accommodation.
Tony O'Loughlin describes Embassy House as "a trophy office investment with strong growth prospects". He says the office block is as good as it gets in commercial real estate terms. Its "a combination of a trophy building, superb location, excellent tenant mix and high specification together with the unusual feature of decennial insurance emphasise the intrinsic quality inherent in this investement opportunity."
Embassy House is being sold following the dissolution of Sheelin McSharry. The company also developed the 153-bedroom Herbert Park Hotel and about 350 apartments on the former Johnston Mooney and O'Brien site. It is acknowledged as one of the most prestigious developments in Dublin over the past decade.
Embassy House is most likely to be bought by an institution wanting to strengthen its office portfolio. There have been relatively few opportunities in recent years for the funds to acquire third-generation office investments with strong covenants. One of the exceptions was the decision by the Irish Pension Fund Property Unit Trust (IPFPUT) to buy the Coopers and Lybrand headquarters building at George's Quay in Dublin. Embassy House goes to tender on November 26th.
