Irish REIT takes on two Dublin office properties

Irish REIT Hibernia is acquiring two Grade A office buildings in Dublin, in a partially deferred transaction.

Montague House and Hardwiche House are being sold by the Hardwiche Group. The deal values the two buildings at €60 mln, or €692 per square foot (0.92 of a square metre).

This is the fourth acquisition by Hibernia since listing in December 2013 and will bring total funds committed to approximately €208 mln.

The transaction is initially being structured as a loan acquisition, with Hibernia paying €18.25 mln and gaining immediate operational control of the buildings. Under the terms of the contract, Hibernia will have the right to take full ownership of the buildings at any time up to mid-2016 for an additional sum of €41.75 mln. Hibernia said that under current Irish REIT rules it is likely to do so in December 2015.

Upon taking full ownership, the net initial yield (after costs) will be 4.4% based off average passing rents of €30 per sq ft, with all the income subject to rent reviews by the end of 2018. The net initial yield on the €18.25 mln loan amounts to 7.7%.

The properties are located in the core of Dublin’s traditional CBD on two contiguous back-to-back sites which front onto Hatch Street Upper (Hardwicke House) and Adelaide Road (Montague House).

Both properties were built in 1999 and provide 8,175 m2 of prime Grade A office accommodation across five stories and 56 basement car parking spaces. Both are multi-let to a range of tenants, including Prudential International Assurance, Deloitte and Capita, with a weighted average unexpired lease term across the two buildings of seven years.

Of the current €2.7 mln annual rent roll, 12% will be reviewed in 2016 and 88% is due to be reviewed in 2018. Some 12% of the rent roll is subject to tenant break clauses in 2016.