Office Investments Two recent office sales have returned very low initial yields, writes Jack Fagan
The pent up demand for secure commercial investments has resulted in two properties selling for well above the guide prices. Agent Finnegan Menton handled both sales.
There was a packed auction room for the sale of a two-storey office investment at Clonskeagh Square in Dublin 14, which sold for €6.35 million - a long way ahead of the guide price of over €4.5 million. The net initial yield will be 2.75 per cent - one of the lowest returns in the city for an office investment.
No fewer than 36 parties had sought the conditions of sale and there were six bidders on the day when the bidding opened at €4.5 million.
Four of those chasing the investment were still on their feet when the price went over €5.5 million and auctioneer Iain Finnegan eventually knocked it down to Niall Harper of Harper O'Grady at €6.35 million. Mr Harper is understood to have been acting for a client with a self-administered personal pension fund.
One of the attractions of the investment is that the 743sq m (8,000sq ft) building has Bank of Ireland as a tenant for at least another 17 years. The building also has a particularly generous car-parking allocation of 33 spaces. There is also significant potential to increase the present rent of €194,000 when the next rent review takes place in November, 2008.
Another investor, who paid over €4.5 million for an office investment at 22/23 Eden Quay in the city centre, will have to settle for a net initial yield of 3.75 per cent. Finnegan Menton had been quoting over €3.7 million for the two interlinking buildings which have a floor area of 635sq m (6,835sq ft) and three car-parking spaces to the rear.
The buildings are let on a 25-year lease from 1999 at a rent of €190,000.
However, the tenant, Custom House Administration & Corporate Services, has a break option in 2014 with a one-year rental payment as a penalty. The company, which also occupies two adjoining buildings, is a long established fund manager with responsibility for assets of €11.6 billion. It was established in 1989 and has 80 employees in Dublin.
