The two Bankcentre blocks being sold by Hibernian Aviva were bought at the peak of the market in 2006 for around €90m
HIBERNIAN AVIVA is to put part of its property investment portfolio on the market because, like many other institutions, it is facing demands for redemptions by investors in property funds.
The group is seeking over €50 million for two of the four office blocks it owns at AIB’s Ballsbridge headquarters. At that price the deal would show a net initial yield of 7.15 per cent.
The original trading company, Hibernian Life and Pensions, paid over €170 million for four of the original office buildings at AIB’s Bankcentre at the peak of the property market in April 2006. The two now being offered for sale have a historical value of around €90 million but, with the pressure on to liquidate assets, the institution has dropped their value by 44.5 per cent in order to offload them.
The significant price adjustment means that Hibernian’s original yield of around 4 per cent is now set to drift out to 7.15 per cent for a cash-rich purchaser.
Most investors who might be expected to pitch for the blocks are hamstrung by the deepening liquidity crisis. One investment vehicle, Claret Capital, was in advanced discussions to acquire the two buildings with a floor area of 7,432sq m (80,000sq ft) but the deal collapsed at the last hurdle.
There are also 87 car-parking spaces with the blocks which have been upgraded and modernised on several occasions since they were built in 1980.
The two blocks are producing a rent roll of €3,654,746 based on €441 per sq m (€41 per sq ft) for the office space and €3,500 for the car-parking spaces. The next upwards-only review is due in 2011 and there are similar reviews in 2016 and 2021. The 20-year lease does not include any breaks and has 17 years to run.
Any sale of the AIB blocks will be closely watched because it will provide long awaited evidence of the extent to which yields have shifted.
Hibernian Aviva’s fund manager, Aviva Investors, said yesterday that it had received “unsolicited approaches” on a number of assets including the holding at AIB Bankcentre and was in ongoing discussions. It said it was pleased to note the good interest in these assets given the extreme lack of liquidity in the commercial investment market at present.
The London-based researcher Investment Property Databank (IPD) has already reported that capital values in offices fell by 34.4 per cent in 2008, a move prompted by a huge increase in yields. The decline in values is likely to have continued through the first quarter of 2009.
Irish Life and Canada Life have been attempting to offload commercial property investments for several months, also because of a an upsurge in redemptions from retail investors at their unit linked funds.
The main property for sale in the Irish Life portfolio is Hambledon House, a five-storey mock Georgian building at Lower Pembroke Street in Dublin 2, which is multi-let. Despite the difficult climate there is interest in the building from several parties because of its prime location and 67 car-parking spaces which are close by in a surface car-park. The 3,729sq m (40,140sq ft) building was previously part of Scottish Provident’s Irish portfolio which was sold to Irish Life in 2005.
