State pays £2.7m for offices

THE State has given a further indication that it may be re-entering the property market with the acquisition of an office block occupied by the Department of Social Welfare in Dublin city centre. Last month, it also bought an office building occupied by Bord na Gaeilge, a semi-State body.

The Office of Public Works is understood to have been the highest bidder at close to £2.7 million for Goldsmith House, a modern office building at Pearse Street, Dublin 2, which is currently rented at £208,000 per annum. Formal contracts have yet to be exchanged.

With the State locked into two long leases on the building - one has 19 years to run and the other one does not expire for 24 years - it may well seem good business to buy the building even in today's vibrant property market. There were several bidders for the office block, most of them private investors, wishing to take ad vantage of the historically low interest rates. The price paid by the OPW equates to a yield of about 7 per cent.

Property market sources suggested it was unlikely the OPW would acquire all other State-occupied buildings which came on the market. The length of the leases in each case is likely to determine whether the State will attempt to buy them. The OPW has the option of selling on vacant buildings once it extinguishes the leases but this is thought unlikely in the case of Goldsmith House because of the scarcity of office space in Dublin. The OPW has surrendered a range of office buildings in recent years.

The OPW first signalled a change of policy last month when it outbid several private investors to buy the Bord na Gaeilge headquarters building at 7 Merrion Square for £1,370,000. The board is paying a rent of £101,000 per annum under a 35-year lease which has another 19 years to run. The yield in this case, 6.8 per cent, is one of the lowest in any of the Georgian squares.

Goldsmith House, a four-storey over basement car-park building, has 19,525 square feet and 24 car-parking spaces.

The next rent review is due in just over three years and the selling agents, Palmer McCormack, advised interested parties that even adopting modest rates of £9.50 per square foot on the offices and £1,000 for car-parking spaces, the reversionary rent will rise to £224,000.

The ground floor and nine car-parking spaces are held under a 35-year lease from 1985 with upwards-only reviews every five years. The upper floors and 15 car-parking spaces are rented under a 35-year lease from 1980 with five-yearly upwards and downwards reviews.

Agents Mason Owen Lyons acted for the buyer but would not confirm that it was the OPW. Palmer McCormack handled the sale on behalf of Canada Life.