Property Update Summary
Quarter 2 Activity
- Strategic disposal of an office in Cork at 25% ahead of its carrying value
- Acquisition of an exciting retail property in Dublin 2
- Letting of the vacant floor in Cairn House, Dublin 18 within two months of launch, to internationally renowned IT security company
- 43.29 % Retail
- 9.31% Industrial
- 29.58% Office
- 3.79% Redevelopment
- 14.03% Cash*
* Includes cash, assets and liabilities.
Quarter 2 Financial Highlights
- Top ten tenants account for over 57% of rental income
- Rent collection rate of 97% to half year 2018
- Attractive Income Yield of 5%
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): €569.8m
Property portfolio size: €454.4m
Annual rental income: €25.2m
Initial income yield: 5.05%
Vacancy rate: 6.20%
WALT: 7 Years and 6 months
Following on from a hugely impressive 2017 during which GDP growth rose by 7.8%, the economic outlook for 2018 and beyond continues on an optimistic trajectory, with forecasted growth of 4.4% for Ireland for 2018 (Central Bank). This is at the upper end of growth expectations for Europe. Irish unemployment is at 5.1% (CSO June 2018), the lowest numbers on the live register in a decade. Full employment, wage growth and tax cuts are boosting real income and driving the domestic economy.
Commercial property transaction volumes reached almost €1.9 billion for Half 1 2018, a very robust start to the year compared to full year volumes of €2.5 billion in 2017. In terms of prime income yields, Ireland continues to look favourable relative to our European counterparts, and provides an attractive spread relative to Government bonds. Prime yields remained stable across the retail (3.2%), office (4%) and industrial (5.5%) sectors in Quarter 2 (Lisney). Prime office rents are coming in at c.€700 psqm, ahead of levels from the previous peak. Take-up continues to be strong, particularly in the office and prime retail sectors. Despite the impact of e-commerce on the retail sector, the Dublin market remains resilient with the better performing shopping centres, retail parks and high street shops driving rental levels and showing little vacancy. The industrial sector remains attractive to investors, with strong demand for logistics reinforced by the continued expansion of online retail.
The Fund’s income profile is very attractive, with an initial income yield at the portfolio level of 5% and a WALT of seven and a half years. The top 10 tenants account for over 57% of the rental income. These tenants are of exceptionally high standard and underpin the Fund’s income stream. The 12 month rolling performance was 5.41%.
The redevelopment projects are progressing well. Enterprise House in Blackrock has been demolished and foundations are being poured for the new building (which is pre-let to Zurich). “Back of house” works at the Blackrock Shopping Centre are complete and upgrade works are due to start in Quarter 3. The refurbishment of the adjacent Trident House commenced in early July and interest from potential tenants is strong. In Royal Hibernian Way the anchor restaurant unit Isabelle’s has been handed over to the tenant (Press Up Group) for their fit out with a planned opening by end of Quarter 3. Work has commenced on the second restaurant unit which will be launched to the market shortly. There were positive rent negotiations within the Clarendon Collection with reversionary uplifts coming through. During the quarter we let the vacant floor in Cairn House, Dublin 18 within two months of launch, to internationally renowned IT security company Relia Quest.
A multi-let office on South Mall in Cork was sold on behalf of the Fund at a premium of 25% over its carrying value. As this was a small property relative to the overall portfolio, the uplift was c.8bps at fund level. During Quarter 2 an exciting retail property in Dublin 2 was acquired for the Fund, to add to the city centre collection. Friends First Investment Division continues to source and analyse investment opportunities for the Fund.
Cairn House, South County Business Park, Dublin 18
Friends First acquired Cairn House in December 2017. It is situated within the thriving 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). It was acquired vacant in 2015 and then fully let to the Ardagh Group a global leader in packaging solutions, in 2016 following a refurbishment. Cairn House is a modern three storey over basement office building which spans some 25,327 sq ft. The building was acquired for its excellent asset management possibilities, which included a vacant floor. The remainder is let to Fonua, a mobile and consumer electronics solutions provider.
Friends First carried out upgrade works in late 2017 and early 2018. Thereafter, the vacant floor was let within two months of its launch to the market, to internationally renowned IT security company Relia Quest. In Quarter 2 the property experienced an uplift in value due to rising estimated rental values in the area and the upcoming signing of the lease. The Relia Quest letting was finalised in July.
Trident House, Blackrock, Co. Dublin
Trident House on Rock Hill in Blackrock Village, forms part of our Blackrock portfolio which comprises the adjacent Blackrock Shopping Centre which is currently undergoing an impressive upgrade, and Enterprise House which has been demolished and is now being rebuilt into magnificent 74,000 sq ft offices, pre-let to Zurich.
Trident House is made up of 18,800 sq ft of quality suburban office space. It is a four storey over basement building, with stunning views over Dublin Bay and includes 21 car parking spaces. Friends First is now commencing an exciting refurbishment project of the building which is due for completion by October 2018. Interest from potential tenants is already strong. We expect given the current market and the level of interest in the building, it will be partially let by year end.
In some tables and charts, due to rounding, the sum of the individual components may not exactly equal the stated totals.