THE Dublin commercial-property market has received a number of fillips in recent days, with strong prices and rents for prime properties. AIB has pulled the sale of its Grafton St branch which would have generated more than €28m.
The price would reflect a yield of around 5.8pc which reflects a value of about 9pc more than that achieved by Marks and Spencer when it sold the Tomy Hilfigger shop across the street last ye
At least three of the offers were above the €25m to €26.5m price guided by the agents, CB Richard Ellis, and most of the offers were from UK investors. However, AIB resisted the temptation to accept the highest offer of around €28m.
Meanwhile, Real Estate Opportunities, the publicly quoted firm led by Johnny Ronan and Richard Barrett, has negotiated increases of around 12pc on the rents from three tenants at its Central Park development in Leopardstown, Co. Dublin. The largest of these rents is the €7.2m per annum now being paid by Vodafone for its 263,000sq.ft of offices.
The new rent of almost €295 per sq.m. is backdated to October 2006 and is well above the €187 per sq.m. being achieved on average for new suburban Dublin offices.
The second tenant is Tullow Oil plc, which agreed a 12.8pc rent increase for its 24,000sq.ft of offices at Central Park.
Ulster Bank is also believed to be close to doing deals for around 12 of the 49 First Active branches that it is currently marketing through DTZ Sherry FitzGerald.
Meanwhile, the overseas investors, F&C Reit Asset Management and Area Property Partners, are understood to be close to completing the purchase of the Liffey Valley shopping centre from Aviva and Grosvenor in a deal believed to be worth about €350m.
This deal will not include the 120 acres of development land at Liffey Valley which is owned by Barkhill, the joint venture between O'Callaghan Properties and Grosvenor.
South Dublin Co. Council recently gave the green light for 450,000sq.ft of retail space on 60 of these acres.
Nevertheless, a majority of Irish estate agents are forecasting that commercial rents and prices will continue to fall in 2010, according to the annual survey from the Irish Auctioneers and Valuers Institute. (See commercial-property section of today's Irish Independent).
AIB's decision to pull the sale of its Grafton Street branch came as a surprise, considering that the bank appears to be under pressure to generate and conserve capital in order to alleviate its balance-sheet bad debts. A spokesman for the bank said it was considered inappropriate to sell this particular branch at this point in time.
However, sources close to the bank have indicated that it has no plans to stop selling other properties and is willing to accept offers that it considers to be good value.Prior to the recent change of management, AIB had generated hundreds of millions of euro from the sale of both its prime Dublin offices, as well as branches.
In all, it has completed sale-and-leaseback deals on about 50 of its 186 branches, north and south of the border.
At the time of the market peak, the sales were part of a strategy for generating capital which could then be lent on to the bank's clients. This was when there was a strong demand for funds to buy all types of properties.
Simultaneously, investors paid strong prices for bank properties because the bank was also offering attractive sale-and-leaseback deals.
Not alone were the rents attractive and came with upward-only rent reviews but the risk was low because of the blue-chip nature of the tenants.