A private investor has bought a retail building in Dawson Street, Dublin, at a lower yield than available if the money had been put on deposit in the bank.
The investor paid €4.9 million for 53 Dawson Street, a modest four-storey over basement commercial building, which is rented at €90,000 per annum.
The yield after costs are taken into account will be a mere 1.65 per cent - well below the 3.5 per cent-plus rate available on deposits with Northern Rock or the 2.65 per cent on offer from Anglo-Irish Bank.
The new benchmark yield is easily the lowest for a Dublin commercial property and reflects the pent-up demand for well-located investment buildings in the city centre.
The price paid yesterday was almost double the guide price quoted by selling agent Lisney.
There was a packed auction room for the sale and though there were 14-15 parties chasing the property, fewer than half of them got a chance to bid. Bidding opened at €3 million and with four bidders making the running, it was eventually knocked down at €4.9 million.
Ann Hargaden of Lisney said that buying the building at a yield of 1.65 per cent only made sense for people with lots of cash on deposit. The huge interest in the sale stemmed from the fact that it was "a nice lot size just under €5 million" and also that people expected significant capital appreciation on Dawson Street.
Interestingly, it was Lisney's first auction of an investment property in the city for years. Such properties are normally sold by way of sealed tenders.
Number 53 has a floor area of 307sq m (3,305sq ft) and is let to Tipperary Crystal under a lease which has another 11 years to run.
Some floors have been subleased including the ground floor, which is occupied by the Pregnancy Stores. Lisney estimates that the overall rent roll from the building will rise to about €120,000 when it is reviewed next September.
Earlier this year Lisney handled the sale of the building next door, let to Ebrokers and the Portuguese Tourist Board, which made €4.5 million, equating to an initial yield of 2.2 per cent. That return will improve once an overdue rent review is completed and a tenant is found for a vacant floor.
