Friday 22 March 2019

Marathon's HSQ scheme on course for €200m sale

Mega deal: The Brunel Building, which is fully let to the HSE, forms the centrepiece of Marathon Asset Management’s Heuston South Quarter portfolio. The sale of the scheme is expected to attract a wide range of investors
Mega deal: The Brunel Building, which is fully let to the HSE, forms the centrepiece of Marathon Asset Management’s Heuston South Quarter portfolio. The sale of the scheme is expected to attract a wide range of investors
Ronald Quinlan

Ronald Quinlan

US property giant Marathon Asset Management has appointed Savills Ireland and Eastdil Secured, a subsidiary of Wells Fargo Bank, to handle the sale of the landmark Heuston South Quarter (HSQ) in Dublin city centre, the Irish Independent can reveal.

Widely acknowledged as one of the capital's foremost mixed-use campuses, the Kilmainham development is expected to attract significant interest from a wide range of Irish and international investors.

The HSQ portfolio is being offered to the market in the expectation that it will secure in excess of €200m.

That price would represent a premium of €80m on the €120m Marathon Asset Management paid in 2014 to acquire the loans associated with the scheme from Lloyds Banking Group.

Marathon's move to dispose of its Heuston South Quarter portfolio comes just one year on from the €175m off-market sale by US property group, Northwood Investment Corporation, of Eir's nearby headquarters to a purchaser linked to CK Hutchison Holdings, controlled by Li Ka-shing, Hong Kong's richest man.

Marathon's HSQ portfolio comprises 266 apartments, 9,877 sq m (106,319 sq ft) of Grade A office space, 4,463 sq m (48,034 sq ft) of commercial space, and a 1.47 hectare (3.63 acre) development site.

While the scheme is already delivering significant annual income for Marathon, there is clear potential for that figure to be enhanced further by its new owners.

In the case of the HSQ portfolio's 266 apartments, it is understood these units are being rented at levels below the current market rate.

While there are a further 79 apartments at the scheme, these have already been sold and consequently are not included in the sale.

In terms of its commercial offering, the centrepiece of the HSQ portfolio is the Brunel Building.

Extending to 7,235 sq m (78,841 sq ft) over 13 floors, the property is fully let to the Health Service Executive (HSE).

The retail element of the HSQ portfolio is distributed across 7,015 sq m (75,512 sq ft).

Supervalu is the anchor tenant, and occupies a 1,862 sqm (20,044 sq ft) unit on a 25-year lease from 2010.

Other retail tenants at the scheme include Insomnia Coffee, HSQ Pharmacy, Anytime Fitness, and Safari Childcare.

The HSE also occupies an own-door office of 1,662 sq m (17,893 sq m).

A feasibility study prepared for HSQ's 1.47 hectare (3.63 acre) development site suggests there is potential for the new owner to deliver a mixed-use scheme comprising 245 apartments along with office and retail accommodation subject to planning permission.

The site previously had planning permission along with adjacent land for a mixed-use scheme which has since lapsed.

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