Irish make big profit on UK sale

Around 40 Irish investors have sold an MS building in London for £66.5m – £12.5m more than they paid six years ago

A GROUP of about 40 Irish investors are set to make a handsome capital profit from the sale of a key retail and office building on King’s Road in the Chelsea area of London. The group, who are clients of AIB Private Banking, have secured £66.5 million (€78.8 million) for the Marks Spencer block which was bought six years ago for £54 million (€64 million). The new owner, an overseas businessman, has settled for an initial yield of 4.97 per cent on the investment.

It is thought likely some of the beneficiaries of the sale will reinvest part of their profits in the Dublin commercial property market, where values have fallen by up to 50 per cent over the past three years.

Dublin-based investment agents already have instructions from a large number of private investors looking for prime properties in the city valued at up to €10 million. Although there is relatively little for sale at the moment, the expectation is that early in the new year, Nama will trigger the sale some of the distressed properties passed to it. A number of non-Nama banks are also expected to move ahead with the sales of properties in receivership.

AIB Investment Managers (AIBIM), which handled the London property since it was first purchased in the middle of 2004, had urged the investors to cash in on the high valuations on King’s Road in recent months.

The guide price for the investment was originally set at £65 million (€76.8 million) and with several parties showing interest in it, selling agents CB Richard Ellis managed to push the price up to £66.5 million (€78.8 million).

AIBIM’s active management of the property, including the renegotiation of leases and rent reviews, generated an 18 per cent increase in the passing rent since 2004.

Marks Spencer contributes about 75 per cent of the £3.5 million rent roll. Its lease has another 13 years to run. The balance of the rent on the 5,852sq m (63,000sq ft) building comes from retailers 3 Store and Mori Sushi and office tenant Tullo Marshall Warren, one of the largest direct marketing agencies in Europe.

Caroline McCarthy of CBRE, who handled the sale, said the core central London market had shown itself to be very robust, even during the financial turmoil seen in recent years. “This market remains very liquid and continues to offer superior returns. The attraction of this King’s Road investment is the prime location and diversified high quality income.”