Property Update Summary
Quarter 4 Activity
- Acquisition of Cairn House, a modern office building in Leopardstown, Dublin 18
- Planning permission granted for the upgrade of Blackrock Shopping Centre
- Tenant secured for anchor restaurant in Royal Hibernian Way and upgrade works have commenced
- 43.45 % Retail
- 10.00% Industrial
- 32.14% Office
- 2.28% Redevelopment
- 12.13% Cash*
* Includes cash, assets and liabilities.
Quarter 4 Financial Highlights
- Top ten tenants account for almost 60% of rental income
- Rent collection rate of 99% for 2017
- Equivalent Yield of 5.60%
Lease Expiry Profile - % Net Rent
Based on scenario with all breaks exercised; excludes tenants on a rent free period.
Irish Commercial Property Fund Statistics
Overall fund size (includes cash): €529.9m
Property portfolio size: €431.9m
Annual rental income*: €24.3m
Initial income yield*: 5.12%
Equivalent yield*: 5.60%
Vacancy rate: 6.15%
WALT*: 8 Years
*excluding rent free periods of less than 60 days
The performance of a property market is hugely dependent on economic fundamentals. The Irish economy continues to perform well, with GDP growth expected to come in close to 4.8% for 2017, and is forecast at c.4% for 2018, the fastest pace in Europe. Unemployment is now 6.1%, down from 15.2% in 2012, and much lower than the European average of 8.9%. Expanding employment, wage growth, tax cuts (although relatively minor) and weak Consumer Price Index inflation are all boosting real income, which in turn, is driving the domestic economy.
These macro-economic indicators make Ireland a very attractive destination for international investors’ capital. However, the continuing housing crisis (both the serious shortage of accommodation coupled with the increasing cost base) is posing a problem for companies looking to relocate staff to Ireland, and is negatively impacting our international competitiveness, particularly in the wake of Brexit. Changes to planning guidelines for build-to-rent schemes may help address this issue in 2018 and beyond.
In terms of prime yields (across all sectors) Ireland continues to look attractive relative to our European counterparts. There is still scope for further yield compression in the coming months albeit more limited than previous quarters. Prime yields remained stable across the retail (3.2%) and industrial (5.5%) sectors, whereas the office sector decreased slightly from 4.5% to 4% (Lisney). 2017 saw a new record being set in the Dublin office market with take-up exceeding all previous years. In total, more than 320,000 square metres of office lettings were recorded in the capital during 2017 – more than a third higher than the volume of take-up achieved in Dublin at the peak of the market in 2007 (CBRE). The Industrial sector continues to attract significant interest due to increasing demand and the expectation for further rental growth.
The Fund’s income profile continues to be very attractive, with a strong initial income yield at the property level of 5.1% and a weighted average lease term of eight years. The top 10 tenants (by rental level) account for almost 60% of the rental income. These tenants are of exceptionally high standard and underpin the quality of the Fund’s income stream.
The performance year to date has been somewhat muted. The main “drag” on the performance has been the three Blackrock Properties, which are at the beginning of their redevelopment cycles and preparatory costs (such as planning permission, design, architects fees etc) have been incurred. However we expect that the redevelopment of these properties will add value and enhance the income profile of the Fund over the coming months and years.
In Q4 we closed the acquisition of Cairn House, in the South County Business Park, Leopardstown, Dublin 18 adjacent to Central Park and Sandyford Industrial Estate. It was purchased at a strong equivalent yield of almost 6.5%. It is partially let to Fonua (a mobile phone solution provider) and has short term value-add potential through letting the vacant space. In the medium term we will explore adding an additional floor.
We received planning permission for the upgrade of Blackrock Shopping Centre, while also progressing plans for Trident House (in Blackrock) and the contractors have commenced the redevelopment of Enterprise House (which is pre-let to Zurich). The anchor restaurant for Royal Hibernian Way is now pre-let to a very exciting restaurant offering by Press Up Group. In addition, we received planning permission for the upgrade of the mall area and the retail facades. We expect to have the works completed on the mall by Q3 2018. The opening of the LUAS line through Dawson Street has provided a great boost to this area. Finally we completed two new lettings in the Kilkenny Retail Park to Harry Corry and EZ Living. The park is now fully let.
Cairn House, South County Business Park, Leopardstown, Dublin 18.
Friends First acquired Cairn House in December 2017. It is situated within South County Business Park in Leopardstown, adjacent to Central Park and Sandyford Industrial Estate. It benefits from excellent transport links including the LUAS. The Fund is also the owner of the adjoining Ardagh House (formerly Pelham House), which it acquired in 2015 and is fully let to the Ardagh Group, a global leader in packaging solutions. Cairn House is a modern three storey over basement office building which spans some 25,327 sq ft.
It is partially let to Fonua, a mobile and consumer electronics solutions provider.
The property will provide excellent asset management possibilities for the Fund, including the letting of the vacant second floor. The property was acquired at a strong equivalent yield of almost 6.5%.
Unit 100, North West Business Park, Dublin 15.
Northwest Business Park is an established manufacturing and distribution location situated 1.5 miles from Blanchardstown. It is accessed via Junction 6 of the M50 allowing easy access around Dublin and to all provincial routes. Its close proximity to Dublin Airport attracts transport and logistics operators to the Park. The building itself is a modern high bay warehouse with two storey office accomodation. It provides a single unit of 87,476sq ft with sought after 15 metre eaves heights.
The building has a high quality tenant as it is fully let to Oasis Document Management Limited. It is used entirely for storage and management of offsite filing.
It benefits from a long term lease with twelve years remaining and five yearly upward only rent reviews. Industrial property continues to remain in high demand. It has an attractive initial yield of just under 7%.
In some tables and charts, due to rounding, the sum of the individual components may not exactly equal the stated totals.