Tuesday 6 December 2016

Credit Suisse doubles money on IFSC deal

Published 26/05/2016 | 02:30

La Touche House, one of the prime blocks in Dublin’s IFSC, is valued at twice the price it sold for in 2013
La Touche House, one of the prime blocks in Dublin’s IFSC, is valued at twice the price it sold for in 2013

A Prime office block in Dublin's IFSC that was bought three years ago by a fund controlled by Credit Suisse has doubled in value.

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La Touche House is now valued at €70m - that's twice the price it was sold for in 2013 by a group of up to 78 private investors that had been assembled by Warren Private. Among those who were part of the syndicate to buy La Touche House was former Ireland football manager Steve Staunton.

The surge in the building's valuation starkly demonstrates the rapidity and scale with which the capital's office market recovered following the crash.

The sale during the downturn also underscores how deals snapped up by outside investors have provided massive returns.

La Touche House was acquired in April 2013 by a Luxembourg-based company backed by a Credit Suisse fund.

Accounts for the Luxembourg firm seen by the Irish Independent demonstrate how quickly the building's value shot up following the purchase.

By the end of 2014, the building was valued by Zurich-based firm Weust and Partner at €50.4m. By the end of 2015, that valuation had soared to €70m.

Given the lack of prime office space in the capital, it's likely that the valuation has risen even since last December.

La Touche House was built in 1993 and formed the vanguard of the IFSC development. Bank of Ireland bought it that year as a shell building for €38m.

When the investors assembled by Warren Private queued up to buy it in 2002 for €82m, they were lured by tax breaks that enabled them to offset rental income against €48m in unclaimed capital allowances. That was likely to result in a tax break of about €100,000 per investor. Those investors - including high-profile Irish business people and professionals - stumped up a total of almost €25m to help fund the purchase. The remainder of the acquisition cost was provided by means of non-recourse finance from Anglo Irish Bank.

The investors subsequently shared a €7m payout after the property, located at the front of the IFSC, was refinanced with Barclays, giving it an estimated value in 2007 of over €100m.

The six-storey block, which has a basement, is occupied by high-profile clients, including Zurich Bank, Dexia Credit, Unicredit and others. It generates an annual rent roll of about €4m.

The accounts for the Luxembourg company behind the building show that a €1.3m dividend was paid last year to the fund that controls the firm.

The Luxembourg company has also set aside an €11.3m provision for the likely tax due on the unrealised capital gain, in the event of a sale, and based on the €70m valuation put on the property at the end of 2015.

Demand for prime office space in Dublin remains strong. But Davy Stockbrokers noted recently that while credit is available for speculative office development, high margins continue to hit viability. It noted that constraints in the availability and cost of labour and materials are also emerging in the construction supply chain, and that these factors are delaying new commencement activity.

A report last week from Knight Frank showed that the amount of office space newly let in the Dublin market was 62pc higher during the first quarter of 2016 than a year earlier. The first quarter office vacancy rate fell to 8.3pc.

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