NAMA oversees second significant domestic property sale

(UPDATE: 2nd March 2011. It seems that NAMA may not have had involvement with this sale even though it relates to a property owned by a Liam Carroll company. It is suggested that the lender may have been the Bank of Scotland Ireland which of course is not a NAMA Participating Institution)

On 13th January, 2011 on the fringes of his re-appearance before the Oireachtas Committee of Public Accounts, the NAMA CEO Brendan McDonagh announced that he expected to see “two or three sales” worth in the order of €200m by the end of March 2011. And further, NAMA was in advanced talks with overseas buyers for two of the properties; a domestic buyer was expected for the third property.

Since then we have had the announcement of the sale of the Montevetro building on Barrow Street to internet giant Google (sale #1, foreign buyer). And yesterday Gavin Daly in the Sunday Business Post claimed that Google had bought its existing site on Barrow Street, Gordon House for €125m (if the report is correct, sale #2, foreign buyer). The Gordon House complex is reported to have 200,000 sq ft which would mean the purchase price of €625 psf was at quite a premium to the purchase of Montevetro (€476 psf) which in itself was at a premium to the sale of 20,000 sq ft at €283 psf at the start of February, 2011 on Anne Street (500 metres away) in a more traditionally prestigious building though with a dated interior. The sale would mean that Google held more than 400,000 sq ft of accommodation on Barrow Street.

Given that both the Fine Gael and Labour parties have committed to retrospectively examining commercial rents, you can only admire the confidence Google is expressing in the long term prospects for the country as it would appear to be paying in excess of current market prices, particularly in light of retrospective rent reviews.

With this latest sale, Google would appear to have spent €225m on two commercial transactions which are individually the biggest here for several years – way down from the €250m+ blockbuster deals during the boom but significant in today’s market. However the transactions pale into relative insignificance alongside Google’s purchase of the 2.9m sq ft 111 Eight Avenue building in New York at the end of last year. The purchase price was reported to be USD $1.8bn (€1.5bn or €530/psf).

The Gordon House complex is owned by companies in the Liam Carroll group and it is understood that the reported transaction has been effected under NAMA’s auspices. In addition to the €300m sale of 20, Grosvenor Square first reported on here last week, NAMA is certainly well on its way to equalling last year’s tally of €1.6bn of sales but quite soon NAMA is going to have to confront its massive portfolio of less prime property, the low-hanging fruit is disappearing.

So, going back to Brendan McDonagh’s statement in January, we would appear to have had two sales to foreign buyers – will the third sale to the domestic buyer materialise before the end of March?

UPDATE: 2nd March, 2011. Reporting on the above transaction in today’s Irish Times, Jack Fagan omits any mention of NAMA and claims the loan underpinning the complex (Gordon House and Gasworks House) belong to Bank of Scotland Ireland which of course is not a NAMA Participating Institution. Jack is also claiming that the price is “slightly over €100m” which implies that it is not €125m. Jack’s reporting has the feel of being correct as he cites details such as the sale being handled by the receiver David Hughes of Ernst and Young and that Google were paying €8m per annum (equivalent to €40 psf by the way) for the two buildings with 10 years remaining on their leases. Jack reports that the price paid by Google for the two buildings is “considered on the strong side” – at close to €500 psf and with an incoming administration likely to put through legislation to allow retrospective reviews that may be an understatement. Still you’d have to ask where Gavin Daly at the Sunday Business Post got the information to lead him to write “The transaction is also thought to involve the National Asset Management Agency (Nama), which acquired Carroll’s property loans last year.”

UPDATE: 8th March, 2011. There is unconfirmed speculation that in addition to the commercial property acquisitions, Google has been buying residential real estate closeby to its offices. There is speculation that Google is acquiring 25 apartments in Liam Carroll’s Gasworks building, understood to have been developed by Fabrizia Developments.