Designed and constructed by the P Elliot group (now in receivership – click here for that company’s description of the project) for the Riverside II Partnership, a consortium that is understood to include the Kelly, McCormack, Flynn and Elliot families, sources claim that a landmark building on the southside of the Liffey in south Docklands is to be put on the market through Knight Frank with a price tag of €35m (€396 psf).
The Riverside II office block, a 5-year old, 8,200 sq metre (88,232 sq ft ) building is currently home to a number of tenants including Beauchamps solicitors and BNY Mellon. It is understood the annual rent collectible stands at €3.2m and that leases have up to 10 years to run. It is further understood that the building is subject to a loan from Bank of Scotland (Ireland), now part of the Lloyds banking group. BOS(I) exited the Irish market in 2010 and transferred much of its loan portfolio to new loan workout company, Certus. Last week, it was reported by Property Week that Lloyds had entered into a €1bn tie-up with Stephen Vernon’s Green Property group.
The capital’s office market is in deep depression at present. Looking back now, it is indeed surprising that Google took the plunge and bought the 210,000 sq ft Montevetro building earlier this year. The building, just around the corner from Riverside II was reportedly purchased by the search engine giant for €99.9m (€476 psf). Google also bought Gasworks House for “slightly over €100m” (€115m according to some sources). But aside from these two transactions, the office sales market has been deathly quiet. There was a €9m sale and leaseback to Ericsson in Clonskeagh,Dublin and there might have been a few smaller transactions. But that’s it, and we’re already 2/3rds of the way through the year.
The absence of credit, lack of confidence in the economy generally (and specifically concern over the IMF bailout) and the dilly-dallying by Minister Shatter over Upward Only Rent Reviews (UORRs) are all blamed for the sorry state of the market. NAMA’s plans for its vast portfolio are also still unclear – there is a target to reduce NAMA’s €30bn debt by 25% by 2013, a maximum of 28 months hence, and it is unclear how this will reflect in the Irish office market – will NAMA concentrate on UK disposals? will NAMA concentrate its efforts on Irish residential with its innovative mortgage product? On Monday, it was exclusively reported on here that NAMA had sold a 7-acre site with an office building in Clonskeagh, Dublin for €8m which had been purchased for €25m in 2003, so it seems NAMA is prepared to market office property here and take losses (by reference to original values and possibly the par value of the loans, and indeed perhaps by reference to what NAMA paid for the loans). But generally there is a lack of clarity in NAMA’s intentions. Irish commercial property prices have fallen by 7% in the first two quarters of 2011 according to Jones Lang LaSalle (and reflected in rival SCSI/IPD’s index) though industry sources confirm that the decline may in part reflect the uncertainty about UORRs.
Against this background, the sale of Riverside II with a price tag of €35m will be a challenge.
Neither Knight Frank or selected parties to the Riverside II Partnership had commented on the Riverside II sale at time of writing.
UPDATE: 17th August, 2011. Knight Frank has confirmed that it has been instructed by the Riverside II Partnership (not the bank) to dispose of the Riverside II building on Sir John Rogerson’s Quay. Knight Frank is currently preparing an Information Memorandum . The property will be offered for sale to a small number of pre-qualified investors who have signed confidentiality agreements.
UPDATE: 9th May, 2012. The building is now reportedly sold to an un-named German fund, though rumours abound that it is Pramerica. The reported sale price is €35.5m representing an intial yield of 8.6%. The Governments messing-about with Upward Only Rent Review changes to pre-Feb 2010 leases is blamed in part for the nine month delay in finding a buyer.
NAMA Wine Lake 
Google have a global strategy and the purchase of two buildings in Dublin are inconsequential to them, in that respect they have “distorted” the market. As for the UORR’s if they are not ditched NAMA will be responsible for a lot of second and third generation buildings, coming back onto the market. They will be abandoned as businesses quietly fold their tents letting people go.
Many business people I have spoken to recently are beginning to realize that their efforts and energy will be better expended in other countries that are business friendly, solvent and less taxing. These people are going to have to be persuaded to stay in Ireland, of the red tape and 1000 quango welcomes.
It is the duration and mismanagement of the recession together with the relentless tightening of the noose on businesses that is doing the damage. Every time consumers have their pocket picked they “plan” to spend less and when they look down the road all they see is a raft of stealth tax barricades being constructed. When Paul Krugman was asked what did he envisage for Ireland over the next five years he gave a one word answer. “pain”.That was over a year ago, nothing has changed, and I am sure he can update his prognosis.
Regarding the UORR’s, there is too much huffing and puffing by the vested interests of pension funds and NAMA about loosing money, were this dastardly act to be accomplished by Mr. Shatter. Thousands of people, once employed by businesses of less than 10 people, are now residing on the dole because lawyer’s and property guru’s over glasses of champaign decided they could rewrite thousands of years of history by inserting a ridiculous, discriminatory, comfort clause into contracts. Personally, I think they are illegal, our high court came very close to saying this also. In fact, it probably would have said so, were it not for the fact they knew that the compensation claims that would follow would wipe out what was left of the commercial property market.
Sorry if this is a silly question, but is this office block being sold by Nama? That is, is this property on Nama’s loan book or is this an entirely private sale?
@OMF, no this property has practically nothing to do with NAMA. This is a BOS(I) sale and BOS(I) is not one of the five participating financial institutions in NAMA (AIB, Anglo, BoI, EBS and INBS). However the sale is relevant to NAMA as it will test the water for a significant part of NAMA’s portfolio.
A small correction – the building was designed by KMD Architecture, P. Elliott were the main contractor.
@sbtrct, accepted, though P Elliot did say it was contracted for design and construction. There was conceivably an implication that P Elliot subcontracted the design.
“P. Elliott & Company won the Dublin Docklands Development Authority Riverside II design and build competition in February 2004”
http://www.pelliott.com/project-portfolio/project/49/riverside-ii-forbes-quay/
The reason I commented is that your opening sentence states that Elliott’s designed Riverside II. They didn’t, and the page you linked to doesn’t say they did either. It credits KMD as the architect and P Elliott as main contractor – OCS and In2 were the structural and services engineers respectively, as a matter of interest.
The contract may well have been design/build, but Elliott’s role was “build”.
@sbtrct, thanks for the clarification.
@Mark, the UORR question is indeed interesting as it seems established that part of the startling decline in commercial values in Q2, 2011 was caused by the anticipation of Minister Shatter and the new FG/Labour government delivering on their commitment in their manifestoes and Programme for Government. The latest leaking a few weeks ago suggested there would be a new Bill in September but that there would be steep hurdles for tenants to overcome before they could escape the terms of the present UORR leases. And indeed this would seem to chime with the concerns that a complete liberalisation of UORRs would be prohibitively expensive. I wonder might we see a bounce in values when the new Bill is published next month, particularly if it turns out to far more restrictive than was hoped for by tenants?
This is an interesting sale from a couple of viewpoints. First, as NWL states, it is a test of the commercial market in Dublin for a fair slice of NAMA’s loanbook.
Second, at approximately €40 per sq. ft. (if your areas are correct) it is over-rented in the current market, which brings us to point no. 3. If the UORR legislation comes into existence, there will be a fall in value of approximately 30% in this asset. Even if the UORR legislation is not implemented, the over-rental will ensure that there is no increase in the investment income over the short to medium term, probably to the end of the lease period.
All in all, a tricky sale, but into a market starved of investment properties. As I said – an interesting sale.
[…] on the space if a new lease was created today. The buyer is understood to have been Prudential. And Riverside II is also understood to have sold for close to its asking price of […]