News emerging from credible sources this evening that NAMA has agreed the sale of the Bank of Ireland building at 39 St Stephen’s Green on the corner with Merrion Row. This is a former Bernard McNamara building which was latterly controlled by receivers Farrell Grant Sparks and was being marketed by Knight Frank. The asking price was understood to have been €6.25m but it seems to have been snapped up by an as-yet unidentified Irish buyer for €7m who beat 16 other bidders for the property – seems like there is life in the Dublin commercial market yet!
The key attraction of the fine looking building – pictured above – is the tenant and tenancy; Bank of Ireland has another 19 years on its Upwards Only Rent Review lease which presently pays €54 psf or €404,000 a year for the 7,500 sq ft building. The asking price represented a 6.5% yield or 6.2% after costs and the settled price represents a 5.8% yield or 5.6% after costs. The building was originally bought by Bernard McNamara personally for about €12m in 2006.
The speculation is that NAMA acquired the underlying loan for just under €7m and given the 22% decline in commercial property generally since November 2009, the Agency is understood to be cock-a-hoop with the transaction, even if the actual profit on the sale might only stretch to buying a few decent bottles of Krug.
There is another McNamara office building on Arran Quay close to the Four Courts which was also being sold by Knight Frank with an asking price of €1.3m and it is understood that this building has also gone sale agreed at its asking price which represented a 8.5% yield. The tenant here is also Bank of Ireland which has a lease with a break option in 2021 and is paying a rent of €112,000 a year on the 4,000 sq ft building.
With a dearth of office transactions in Dublin in recent months, it is difficult to gauge current yields. Riverside II sold at a reported €35.5m suggesting a 8.6% yield, One Warrington Place sold for €27m suggesting a 7.25% yield. But by any standard a 5.6% yield on St Stephen’s Green is encouraging for NAMA.