A property in Dublin and one in Brussels have been bought by two private investors, writes Gretchen Friemann.
IIB BANK has succeeded in raising €14.2 million from its private clients for two separate property deals despite the ongoing liquidity constrictions that are hampering market activity and suppressing investor confidence.
Both deals were structured by the bank's long-standing clients with investors in one consortium stumping up €8.6 million to purchase an office building in the Northern Cross scheme on Dublin's Malahide Road, while a second set of investors paid €5.6 million for a 60 per cent stake in a development site near the European Parliament in Brussels.
Although there is a speculative element in the Brussels deal, both transactions offer investors a guaranteed return, illustrating the risk-averse sentiment that now dominates the market.
Newenham House was offered to the bank's consortium by PJ Walls Holdings, the developers behind the €450 million Northern Cross scheme, for €24.8 million. The company is one of the bank's oldest clients with a relationship dating back to 1987.
Although construction at the development has been halted because of the uncertainty engulfing both the residential and commercial sectors, PJ Walls Holdings' financial position is understood to have strengthened throughout last year, with turnover in 2007 expected to be in the region of €272 million while profits before tax will come to €15 million.
It's understood the firm has so far sold around 500 units at the site where retailers Tesco, Meadows and Byrne, Fresh foodstore and Insomnia coffee company all have sizeable outlets.
And as investment activity is at a virtual standstill, the acquisition of Newenham House - located behind the Northern Cross scheme's anchor tenant, the Hilton Hotel - may end up ranking as one of the most significant deals for 2008.
IIB is providing a €19.8 million non-recourse loan (80 per cent LTV) for the investment, which will deliver a 5.9 per cent yield and is described as "low risk" in an official marketing document for the property.
According to the financial institution's head of commercial banking, Michael Gilmartin, the acquisition represents a "yield play" for investors - implying that the building's rental income and asset value could rise significantly as the area grows into an established town centre.
The 6,085sq m (65,503sq ft) building generates an annual rental income of €1.46 million and is occupied by three blue-chip tenants: hedge fund company, JP Morgan Tranaut, information services firm, Experian, and Cerner, the US healthcare information technology giant.
Yet while Gilmartin maintains there are some "excellent buying opportunities" in the domestic market, he claims the focus is on "securing transactions on overseas locations. Many of our clients are already involved overseas so we have a natural fit with their ambitions".
One of those clients is the O'Connor property group, run by developer John O'Connor, who is seeking planning permission for a 31,000sq m (333,680sq ft) residential and commercial scheme in Brussels.
The 1.2-acre site is currently used as a car-park and is located in the Belgian capital's Leopold area, close to both the European Parliament and the European Commission.
Although technically regarded as a mezzanine financing deal, because Mr O'Connor has personally guaranteed a 20 per cent return on the invested funds within a 16-month timeframe, investors also have the opportunity of capitalising on a 33 per cent uplift in the land's value, following the anticipated granting of planning permission.
According to Gilmartin, the appetite for such speculative deals among financial institutions and investors alike has dried up in the Irish market and he predicted this situation would continue as long as the residential sector remained in the doldrums.
IIB Bank is a wholly owned subsidiary of KBC Bank and Insurance Group, which has headquarters in Brussels.
