Commercial Property

Thursday 21 August 2014

Marker Residences sell-off could trigger run on assets

Peter Flanagan

Published 27/04/2014 | 02:30

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CHECKING OUT: New York-based Brehon Capital has put the Marker Residences in Dublin up for sale for around €40m, an asking price that surprised many

BREHON Capital's decision to sell a group of luxury apartments tied to the Marker Hotel in Dublin may signal the beginning of a sell-off of Irish commercial property by overseas investors.

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Industry sources contacted by the Sunday Independent after the US firm announced it had put the Marker Residences up for sale said there was a possibility other players who have come to Ireland in recent years may look to cash in some of their profits.

New York firm Brehon Capital paid some €30m for the Marker Hotel and attached apartments in Dublin's Grand Canal Dock three years ago.

The firm had long been expected to sell the apartments first, but the asking price of €40m has taken some industry experts by surprise.

Brehon paid €30m for the hotel and apartments, and are understood to have invested another €18m to finish them.

"If they get €40m for the apartments, and I expect they will, then they will have effectively paid €8m for a five-star hotel in the middle of one of the most important parts of the city from both a business and pleasure perspective," said one Dublin agent involved in the investments sector.

"Look at Grand Canal Dock. There are any number of big, rich multinationals who will put staff up in the Marker.

"Then there are a huge number of people living in the area with substantial disposable income who wouldn't blink at dinging there or using the rooftop bar, never mind trade coming from the Bord Gais Theatre," he added.

Across the River Liffey, the Clarion Hotel sold for some €33m, implying the Marker Hotel is worth at least that.

"Now, say you are a private equity house that has bought in here over the last couple of years. You know you are have a guaranteed profit... It only makes sense that you would at least look at selling at least some assets," the agent added.

Brehon have made clear that the proceeds of the sale will be reinvested in Irish property, but other firms have made no such promises.

KennedyWilson is seen as being here to stay, but it is sitting on enormous paper profits barely three years after arriving here in 2011.

When the One Grand Canal Office block, which sits almost beside the Marker, changed hands for €93m in December, it's sale price equated to about €700 a foot – an increase of nearly 50pc on a deal Kennedy had been involved in barely six months previous. That deal also set a new floor for office sales in the Dublin 2 and 4 prime areas that was far in excess of any previous deals.

Speaking at a property conference last month, Brehon principal Kevin McGillycuddy said that while some of the overseas money would only be here for three or four years, he expected other firms, including his own, to stay.

Other experts believe that while a major sell-off is unlikely in the short-term, investors are now looking at divesting assets and crystalising profits.

"The Marker investors were primarily hotel investors and we're never going to hold multi-family long term," another agent claimed.

"They finished it out and got it fully let up at good rents so it's an ideal time to sell it .

"I don't think this in itself will encourage a big sell-off, but, definitely, some investors are starting to carve up things they bought over the last few years where there is profit to be taken," he added.

Such a sell-off is already happening in London, where some of the biggest real estate investment trusts have begun to sell some of their more risky assets to overseas investors.

While both are still taking on a large number of prime assets, they have begun to divest of their lesser properties while there is still an enormous market for them.

The Marker apartments building includes 84 luxury apartments and six fully occupied commercial units at ground-floor level, with car parking provision for 113 spaces at basement level.

Rental levels for the apartments currently range between €1,900 and €2,400 per month, producing a gross rental income of approximately €2.1m.

Commenting on the sale, Mr McGillycuddy said: "We bought this extraordinary development at a time when there was little appetite to invest in Irish residential property and we have brought it to life and woven it into the fabric of the Docklands community.

"We are very optimistic that there will be a high level of demand from both domestic and international investors looking to acquire a uniquely located asset with an attractive rental yield, high-quality tenants and significant growth potential," he added.

Sunday Indo Business

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