Jack Fagan has a rare weekend outing in today’s Irish Times where he reveals that a consortium of European investors has bought the four main office blocks of AIB’s Bankcentre in Ballsbridge opposite the RDS. The seller, Aviva is said to have accepted “just over €70m” for the sprawling 154,000 sq ft complex set over four buildings. The property was originally bought in April 2006, a year before the general peak in Irish commercial property, for €177m. Commercial property generally increased by just over 21% between Q1 2006 and Q1 2007 which would have indicated a notional peak valuation of €214m. A €70m price tag today represents a 67.3% decline which is in keeping with the general market as tracked by Ireland’s two commercial property indices from Jones Lang LaSalle and SCSI/IPD.
The tenant in the offices is the 99.8% state-owned AIB which has thus far cost us at least €20.7bn bailout and additional state-aid injected via the NAMA acquisition of loans. There is a lease which expires in 2026 yielding an annual rent of €7m or €41 psf on an upwards only rent review. The yield quoted by Jack Fagan today is 9.6%. Jones Lang LaSalle was the selling agent and the unnamed investors are reported to have been assemble by Davy.
So there you have it, a landmark office block in central Dublin yielding 9.6% per annum until 2026 from a government-backed bank with evidence of a 67% decline from peak.
So AIB, a bank reportedly open for business, cannot afford the funds to buy its own offices, at a yield of 9.8%, on a lease that still has 14 years to run.
A bank that is currently borrowing funds for as low as 1% for the ECB.
This deal should be investigated. It stinks.
The public interest directors on this bank should simply be sacked at this point.
Of all the deals done since recapitalization, this has to rank as the most anti national, anti public interest of the lot.
Those blocks are literally falling apart and in quite poor state of repair. There will have to be a good amount of money spent on them over the next few years
Why did AIB sell them in the first place? I thought they used to own them in the days they were a private bank paying out dividends etc,
So NWL, the PR gremlins got to you too…..
@OMF, the not-reading-the-short-blogpost-fully gremlins have gotten to you!
“The property was originally bought in April 2006, a year before the general peak in Irish commercial property, for €177m. Commercial property generally increased by just over 21% between Q1 2006 and Q1 2007 which would have indicated a notional peak valuation of €214m. A €70m price tag today represents a 67.3% decline which is in keeping with the general market as tracked by Ireland’s two commercial property indices from Jones Lang LaSalle and SCSI/IPD.”
Aviva must have been delighted with the screeching U Turn on UORR.
Market rents probably closer to low 20’s,but this Govt. owned zombie is paying almost double until 2026,to some “foreigners”,no press releases?
Probably a bit politically sensitive to have “Europeans” grabbing too much swag,what with that BILLION heading out the door tomorrow,to unsecured bondholders in yes AIB.
So on this deal alone the intense lobbying by NAMA and cartoonish numbers cavalierly bandied about,are costing the taxpayer about 30,000,000 over the remaining life of the lease.
Probably,about the same next door too,did the Govt. bother with a cost benefit analysis of the impact that abolishing UORR would have had on state owned entities,paying double the market tent for protracted periods?
My guess,the wonderful market savy NAMA’s profits will dwarf any savings from abolishing this archaic legislation,its simply a ridiculous situation when the state is paying double rent to “foreigners”.
@JG, The AIB sale has nothing on Carrisbrook House John, which is currently for sale through DTZ Sherry Fitzgerald.
http://www.myhome.ie/commercial/brochure/the-pembroke-collection-ballsbridge-dublin-4/2118574
Carrisbrook is a grim office block on an important corner site in Ballsbridge (the junction of Pembroke Road and Northumberland Road opposite the old Jury’s hotel), The building has an unique hexagonal plan – the shape of a 5 pence piece – yet manages to be completely uninteresting and insulting to the area.
It extends to 27,940 sq.ft over 8 floors with a very high car parking ratio of 73 cars part ground floor and part basement. The access to the basement is from Baggot Lane to the side. The ownership also includes a small mews house at 122 Baggot Lane and which is 3 bedroomed semi-detached.
There is a single lease of the entire building to Forfas (a government quango) for 65 years on an FRI basis from 1st August 1969. There are 7 year upward only rent reviews.
The rent is €1.18m reflecting €33.75 psf and €3,250 per car parking space. In today’s market this is well over-rented relative to the quality of the space.
Including a small mews to the rear the current overall rent is €1.2 million per annum.
The attraction of this property is the Forfas (Irish Government) lease which has some 22 years to expiry. The only occupant of the building is a sub-tenant – the Israeli Embassy on the fifth floor. They sub-lease 4,653 sq.ft and 5 car spaces and paying a rent of €189,940 per annum. The lease is for 30 years from 10th April 1995 hence the Israelis have been in occupation for over 17 years. They have over 12 years to sub lease expiry. The Embassy has a rolling 5 year break on giving 12 months advance notice. Their rent reflects some €37 psf and €3,500 per car parking space. ‘Way too much – but maybe not for a fortress.
We – the Irish taxpayer – are paying for the rest of the empty space that no one wants to rent or occupy – not new sub-tenants and not any public servants.
No-one wants Mossad Agents frisking them as they arrive for work in the building. The don’t want to do a double-take every time a car stops beside the building, or a parcel is delivered. So it is empty except for the Israelis. And we pay a net €1 million a year for the next 22 years for an ugly empty (except for the Israelis) carbuncle on the Ballsbridge landscape.
Reblogged this on Machholz's Blog and commented:
Wait until the dimwits in the current government present their crushing budget .This price will be views as astronomical .As far as I can see, I see no bottom we have a long way to go to reach that dark place ! With the real unemployment figures concealed from the public I estimate it to be somewhere between 29 an 30%.The banks are now free to crucified their own customers with penal charges and their own customers are been held hostage to ever increasing interest rates whenever they choose! The current government have washed their hands of the countless thousands of trapped citizen’s snared by toxic and corrupt bankers.
Nama is the real culprit here as they have control on the flow of sales of all types of property in Ireland now and with consent of the government they are drip feeding the sale of property, this option is however not available to the ordinary joe who has just lost his job and is forced to emigrate.
It is outrageous, most of the cheerleaders of the property boom are now employed by NAMA as “experts” and are been paid by the victims of these fraudsters. A day of reckoning is coming and it ant going to be pretty !
@WSTT it would appear that Aviva trousered almost 50 million selling this to McNamara.Applying the same yield looks like about 10 million today.Oh well they coughed it and more backup with the AIB deal.
Appears they had a predatory deal with AIB at branch level to suck in the poor ill advised punter on the street at the top of the market.
The minimum investment threshold shoukd be raised,to prevent people getting fleeced,from predatory institutions,wonder how this is working out….
Central Bank should look into these schemes and the fee levels,10,000 is way too low a threshold for funds like this.
9th August 2007
“In the four months since its launch Irish investors have put €87M into Hibernian’s European Commercial Property Fund. Amid talks of domestic economic slowdowns, rising interest rates and the prospect of lower property returns Irish investors have seen the attractions of investing in a high quality European property fund.”
http://www.aviva.ie/group/mediacentre/latestnews/hibernianseuropeancommercialpropertyfund/
@John, The vendors (NIB) has a bid of €15 million for Carrisbrook which encouraged them to put it on the market. As you say it was purchased by McNamara earlier for nearly €50 million. Its only value is as a sleeper – wait until the Israelis leave and get a one off payment of €7 to €10 million from the government to get out of its lease. The sleeping value is in its potential as the site for a new 100,000 sq ft office block. In the end it’s a development play – after you screw the taxpayer of course. The vendors expect it to make about €18 million. They must think that there are still a few suckers left with money… or maybe there is a new lot arriving.
@machholz, Just a correction. Those working in NAMA are the cheerleaders of the boom only insofar as they did not participate in it. If they had, NAMA would not have employed them. Hence they are those that were unemployable during the boom because they were useless. They got the job in NAMA because they were not good enough to be retained by the Agents or property companies when the chips were down and backs were to the wall. They are not even the “busted flushes” of the boom. Just the ones that were as useless a a teat on a bull – even during the celtic tiger era.
@wstt not sure about this strategy just ask the Palestinian’s….”wait until the Israelis leave”:)
Regarding NAMA staff,Sindo today reporting on the “Fox” leaving for a soverign wealth fund.
Unlikely,they buy this but appears quite a few defections,with allegations of Govt. interference.Wonder what the disgruntled x employee was referring too,he mentioned back end piece ?
Sorry,mobile difficult to link the article.
@John G, the Sindo article by Ronald Quinlan is here
http://www.independent.ie/national-news/exec-quit-nama-because-of-state-interference-3244310.html
Didn’t re-report it because the “government interference” seems limited to the 15% salary waiver requested earlier this year, though as you say there is reference to a long-term incentive plan which may have been interfered with as well as a result of government pressure. Didn’t seem like enough to rereport. What would the headline be?
“British property man quits Irish asset management company because govt pressures reduction in salary”
@NWL two of the x employees had quite suggestive surnames for one your eye catching headlines,we have a Fox and a Dicker!
First I heard of employees having a long term incentive plan,appears these golden handcuffs not sufficient to retain the help.
Ronan Fox according to his profile was quite a busy chap,what were the other 200 odd “partners” doing,besides copying data.
He almost singlehanded sold ALL NAMA assets to date,whilst conducting high level talks regarding his future employment prospects.
Tut Tut,expected a little more from Ronan.
@JG,
Theodore Roosevelt, The Man in the Arena-April 23, 1910.
“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”
Those who run NAMA never dared. I would prefer to share my fate with those who did.
@WSTT I must be a little naive but I consider it an honor to help out ones county.
I give Garret Fitzgerald an awful time on here over the stroke him and his son pulled with AIB,and the loan forgiveness.
B
Ahhh mobile
But his biography has wonderful section on his years with Aer Lingus,how all the employees were motivated to work there and serve their country.Appears that shower at NAMA are rushing for the exits,perhaps some problems with the ehm long term incentive plan,such as its not worth the paper it’s written on as the hurdles will never be met.
@JG, The current market does not offer any hope that NAMA will recover even 50% of the money it bought the loans for. Imagine, a bunch of so called specialists who bought a property portfolio large enough to control the market at half its face value and then went on to lose a further 50%. Would you employ them?
The x GS English chap is no loss,lets just say if you review his résumé or CV he has commitment issues,one does not leave GS if things are going well.
“It’s not just that. It’s the minimum salary and the requests for [pay] reductions and the long-term incentive plan, the whole gamut. It’s not just to do with bonuses.” Link above.
What a ungracious comment,very unbecoming to thrash your x employer,tacky and a cheap shot.
Emmet’s last gig before NAMA was buying auto repair shops and Burger King’s in Germany for a two bit little shop,he was only 3 years at Goldman,as I’m sure he’s well aware the good ones make partner.Get invited into private equity deals them retire to a life in Govt. service or buy a vineyard,equestrian center or paint.But they never crib and moan like a has been in the national papers,never.
“Graham Emmett joined Rankvale in 2006 with over 21 years of real estate experience. Prior to Rankvale, Graham spent three years at Goldman Sachs where he led the European CMBS and Real Estate Mezzanine teams, he was finance director at Delancey Estates plc for four years and was a director of Robert Fleming & Co Ltd, heading up its UK Real Estate Financing Unit. At Rankvale Graham takes particular responsibility for modeling, structuring and under taking due diligence on potential new acquistions and negotiating financing facilities with third party banks.”
http://www.rankvale.com/main.asp?pid=69&child=0&parent=0&lang=English
There is something rotten in the state of NAMA,you need some adults over there yesterday.