Buyers have emerged for two investment properties on Dublin's Grafton Street and one at Patrick Street in Cork. The yields in all three cases are in line with previous deals, suggesting that the prime streets are still seen as a safe haven at a time of great economic uncertainty.
The pension fund of the Construction Industry Federation has agreed to pay in excess of £6 million (€7.62m) for the Vero Moda building at 69 Grafton Street while the TSB block next door is to be sold to a private investor for almost £7 million (€8.89m). In Cork, another private investor is to pay over £4 million for the Boots store at 71/72 Patrick Street. Formal contracts have not yet been completed.
John Moran of Jones Lang LaSalle, who is handling the sale of the three properties for KBC Asset Management (formerly Ulster Investment Bank) said he had no comment at this stage.
The pension fund will earn a yield in "the late 3 per centage points", according to another source, while the TSB office and banking hall will initially produce over 4 per cent. The Cork investment will show a return of around 4.5 per cent. Sean O'Brien of Insignia Richard Ellis Gunne is advising the CIF pension fund.
Grafton Street has been greatly favoured by the institutions over the years and many of the buildings there are now owned by funds including Irish Life, Canada Life, Hibernian, Friends First, ESB Pension Fund and IPFPUT. Grafton Street has been the best performing location in the retail sector with an annual capital growth of 9.6 per cent between 1983 and 2000, according to the Investment Property Databank.
Recent transactions in the street include the Marathon Sports shop to IPFPUT for £6 million (€7.62m), BT2 to Irish Life for £17m (€21.59m) and First Active to IPFPUT for £8.5 m (€10.79m). The returns on these sales has been between 3.7 and 3.9 per cent.
The Vero Moda building is currently producing rents of £175,000 (€222,204) per annum. The next rent review is due in February 2005.
TSB is paying a rent of £165,000 (€209,510) for its building while the balance of the rent of £243,405 (€309,060) comes from two office tenants, National Mortgage Services and Ticket Line. The rent of the ground floor and the basement is due to be revised in 2004.
Boots is paying a rent of £132,000 (€185,724) for its Cork store which is held under a 35-year lease from 1987. The next rent review is due in 2002.
While the investment market is considerably quieter than a year ago, a number of pension funds are still chasing prime investment. Life funds, on the other hand, have been coming under pressure to offload commercial properties to meet investors cash demands.
Agents specialising in the investment market say there is a considerable number of private players actively looking for well-let investments. A series of cuts in interest rates has enabled many of them to re-enter the market but with relatively little for sale here, they are increasingly switching to the UK where returns are still more attractive.
Private investors acquiring prime properties here are in some cases locking in for five year rates at around 5.5 per cent. The rate is based on a 75 per cent mortgage.
