Jack Fagan in today’s Irish Times reports on the sale by Royal Liver Assurance of one of the 16 properties that comprised its €120m portfolio whose sale to Green Property/TPG Capital fell through before Christmas in the aftermath of the IMF/EU bailout. Although the buyer of 22-25 Clare Street in Dublin 2 has special status as the existing tenant of the property and with a upward/downward rent review backdated to July 2010 in progress, the price paid confirms that prices have dropped some 70% from peak. Below are the details of the sale and the previous sale of the property in May 2006 when Royal Liver acquired the property (the second Feb 2011 column relates to the new rent suggested in the Irish Times article).
The peak of the commercial market was in Q3, 2007 according to Jones Lang LaSalle, so the €18m price tag in May 2006 might have been expected to increase. That would indicate that the drop from peak has been more than 70%. The latest JLL index for Q4, 2010 showed a 60.2% drop from peak, so arguably prices have continued to decline. But the special purchaser status in this case might mean that the decline is not as steep as might be suggested by the bald figures.
Of interest is the rent for what is a prime located property just around the corner from Kildare Street and practically opposite Trinity College. It is suggested however that the accommodation is “dated”. The rent today is €33.50 psf (that is €670,000 divided by 20,000 sq ft) but it is suggested by the Irish Times that this might reduce to €20 psf with a rent review. This is still slightly above the €18 psf available for prime office property in Belfast (according to CBRE a fortnight ago) and of course there would need to be an adjustment for updating the property but it does seem to indicate that prices in Dublin are coming into line with Belfast. The latest JLL index series suggested that rents were still falling at an annualised rate in excess of 20%.
The sale price of €280 psf compares with the €450 psf which sources have suggested has been achieved at the spanking-new Montevetro building just around the corner on Barrow Street. However you would have to accept that the special purchaser status in the Clare Street transaction might have depressed the price achieved to some extent.
NAMA Wine Lake 
Hi there,
Do you know where I might find a NAMA buildings portfolio list?
Great blog, thank you.
Regards
John
Hi John, such a list doesn’t officially exist outside NAMA. You can contact the agency using the details on their website (www.nama.ie). Remember that at present NAMA directly owns practically no property asset, though it is managing loans secured by specific property. There is a list on here which might give you some indication of the range of assets owned by NAMA developers and others but you need to be careful to read the associated notes and comments to understand the references.
https://namawinelake.wordpress.com/the-developers/
Cheers NWL, for getting back to me on this, much appreciated.
Have a good weekend,
John
A tale of two cities?
An article in today’s London Evening Standard demonstrates the problem NAMA is going to have disposing of its “Ireland” assets.
No investors = no sales. Just the same people who got into this mess, and who under the legislation can’t buy their assets back at market level.
Looks like we are going nowhere.
From the Evening Standard:
“A “two-speed” property market across Europe will develop this year as investment hot-spots like London widen the gap on strugglers such as Athens, Dublin and Lisbon, according to industry forecasts.
Nervy investors will pump funds into property in “winning cities” as fears over the eurozone debt crisis linger, the latest emerging trends report by accountants PricewaterhouseCoopers and the Urban Land Institute says.
“With capital so risk-averse, winning cities like London and Paris will continue to absorb investment as the only places where tenant demand will be robust.
Meanwhile, cities like Dublin will be deserted by investors,” according to the report, which canvassed the views of 600 property professionals.
Even within the UK, the market will be split between more buoyant areas in London and the South East and the rest of the country where spending cuts bite hardest, with top-quality assets seeing the strongest demand.
“London is a country in itself and seems to defy gravity. Regionally, it is going to be ugly. The High Street will be pressured to maintain itself,” one respondent said.
Bank lending is set to remain tight although the gap could be partially plugged by sovereign wealth funds and Asian investors, the report adds.”
Let”s face it. Why would an investor pay 7% for a highly illiquid property investment let to the government in a falling market , when it is possible to obtain nearly 10% (and rising) from government bonds?
Does anyone in NAMA ask themselves this question?
Indeed WSTT, one of the most senior valuers in London (and he had authored the books to cement that position) used take perpetual UK government bonds as the benchmark risk free rate upon which premia would added for various risks/investment differences in property. I don’t think we have perpetuals here but taking the 10-year bond which closed mid-point on Friday at 8.88% (http://www.bloomberg.com/apps/quote?ticker=GIGB10YR:IND) you would normally add 3%+ for market risks, illiquidity, obsolescence, transaction costs. And that is in a “normal” market. Apply a 11% yield to a €400,000 rent and you get a capital value of €3.6m, some €2m less than was paid by the government for the property. To see us at a €5.6m level, our 10-year bond would need come down to below 4%.
[…] The purchase price (€99.9m which is over €450/psf) represents a substantial premium on a recent sale of an albeit dated, though more prestigious office building just around the corner on Clare Street […]