Thursday 22 March 2018

Sign of softening market at top as REIT buys Blackstone offices

Central Quay block in Dublin
Central Quay block in Dublin
Peter Flanagan

Peter Flanagan

Hibernia REIT is to buy a Dublin office block from Blackstone more than four months after a deal for the same property fell through.

Hibernia REIT has paid the US giant €51.3m for the block at Central Quay in the docklands.

Blackstone will make a healthy profit on the sale, but in a sign of what now seems to be a softening market for big ticket property sales, the deal has taken much longer to complete than had been expected. Last November, German property broker Real Is agreed terms to buy Central Quay and a neighbouring block - the Bloodstone Building - for about €123m. Real Is was buying the blocks on behalf of separate German funds.

While the sale of Bloodstone went through, the original deal for Central Quay fell apart. It is understood that Blackstone wanted the German fund to pay close to the same rate per square foot for Central Quay as the Bloodstone Building.

Hibernia was an underbidder for Central Quay and has now moved on the property. Dublin property sources have suggested that Hibernia is paying significantly less for the block than Blackstone had sought last year. Sources close to Blackstone dismissed such a suggestion.

Either way, Blackstone has still made a big profit on the deal, increasing its money by at least 40pc.

Central Quay was built by Sean Dunne in 2007. It is a six-storey, 57,700 sq ft block that is 88pc occupied, according to Hibernia. The sale price equates to a net initial yield of 4.5pc. While the contracted rent averages €47 per sq ft, it is thought that some rents in place are significantly lower than that, giving Hibernia scope for raising them in the near future.

Hibernia chief executive Kevin Nowlan was "very pleased" with the deal.

While the market for big asset sales is seen as slowing down, the rental market in Dublin is continuing apace. With little new capacity expected in Dublin before next year, office rents are expected to be close to €70 per sq ft by the end of next year.

Meanwhile, shares in Green REIT gained more than 2pc after it said it had its "most successful" period to date as it posted interim results which beat expectations. While profits fell marginally in the six months to the end of December, coming in at €67m, net asset value - the key measure for a property firm - climbed 7pc to €1.41 per share.

Company chief executive Pat Gunne said the market here had become more "normal" as the economy grew.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business