Tuesday 27 September 2016

UK property firm U+I ramps up its asset sales in Ireland as firm churns its portfolio

Donal Buckley

Published 18/02/2016 | 02:30

U+I is developing the Vertium Building on Burlington Road in Dublin
U+I is developing the Vertium Building on Burlington Road in Dublin

U + I Group's sale of the Charlemont Clinic site to Dalata Hotels for €11.9m is just the latest in a number of re-trades currently underway by the British development company formerly known as Development Securities.

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Within the space of only two years it has also sold a Georgian mixed use building on Leeson St, Dublin 6. It is currently selling an office and restaurant investment as well as individual newly developed apartments at 55 Percy Place, Dublin 6, as well as well as a portfolio of 27 apartments at Robswall, Malahide, Co. Dublin.

Asked about the progress of these sales, a company spokesperson said this week: "U+I remains an active developer and investor in Dublin, designated as one of our three core focus areas, along with Manchester and London. We continue to look for new opportunities while also nearing completion on a number of ongoing development projects. For example, we recently completed our first development at Percy Place and our major office building, Vertium, is due for completion in Q1 2017.

"As an international capital attracting foreign direct investment and serving as the economic driver for Ireland, we believe Dublin continues to offer a healthy pipeline of development and investment opportunities for us."

The company says the correct figure for its profit from the sale of the Charlemont 0.95 acre site was €2.3m. The group is reported to have paid €7.1m for the site in December 2014, only 14 months ago, and its costs would have included developing the designs and planning application for the four star, 181 bedroom hotel with three apartments which Dalata will operate as a Clayton Hotel. The €11.9m price suggests a site cost of about €60,000 per hotel bedroom.

Dan O'Connor of JLL Hotels & Hospitality Group, agent for the vendor said the sale is the largest Dublin hotel development site sale to occur this decade and "it represents a rare opportunity to deliver much needed high quality hotel accommodation, within the prime corporate and leisure hub of Dublin 2".

"The price paid reflects the continued strong demand from hoteliers to gain a foothold in the buoyant Dublin hotel market, along with the significant skill and expertise of U+I's hotel design and planning team, including architects Henry J Lyons," he added.

On the residential side U+I is believed to have agreed a deal for a portfolio of 27 homes at Robswall in Malahide at close to its €6.5m asking price. As much as 20 of the units are let and producing combined rents of €330,000 per annum.

QRE, Allsop's sister company, is handling the portfolio, and its director Conor Whelan estimates that if the vacant units were let and the rents on some of the other units brought up to their market levels, the overall current estimated rental value of the 27 units would be "in the order of €490,000 per annum."

That suggests a prospective gross yield of 7.5pc. After allowing for service charges and property taxes totalling about €50,000 per annum, Whelan estimates the net initial yield for the 27 would be 6.55 pc.

The 27 units are part of a tranche of 83 homes which U+I bought in August 2014 for a total of €25.2m according to the Property Price Register. They in turn were part of a €36m deal which U+I did to take over part of the Robswall estate owned by developer Gerry Gannon. That deal also included nine acres on which U+I is expected to build 300 houses and apartments.

In October last year the company said it was generating a net yield of 5.5pc from the 83 properties.

U+I is also a partner with Oakmount in the sale of the mixed use development at 55 Percy Place, just off Baggot St in Dublin 4. Savills is guiding around €8.25m for three floors of offices and a restaurant in the development and these floors are generating an annual rent roll of €458,000 suggesting a net yield of 5.25pc.

The Percy Place property was developed by U + I and Oakmount, a company controlled by Paddy McKillen Jr and Matt Ryan. Overlooking the Grand Canal, the development also accommodates 12 apartments which are on sale through Sherry FitzGerald at prices ranging from €750,000 to €1.25m.

Paddy McKillen Senior was also involved with U+I in the Vertium office development next to the Burlington Hotel which has been valued at €170m. The partners, who also include Johnny Ronan and Colony Capital, did a forward funding deal with Germany's largest investment management company Union Investment for this 172,000 sq ft block.

Joint letting agents Savills and Knight Frank are seeking more than €55 per sq ft from prospective office tenants.

Last July U+I flipped a Georgian building at 63 Lower Leeson Street, Dublin 2, at an Allsop auction for €1.56m. That's €510,000 more than the €1.05m paid for it less than 18 months earlier.

Its July price equated to €462 per sq ft which Allsop said was amongst the top prices paid per sq ft for Georgian offices at that time.

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