Quarter 3 Activity
- Acquisition of two exciting properties in Galway and Dublin
- Two new high calibre tenant lettings agreed at 23 Shelbourne Road
- Progression of redevelopment projects, on budget and and on schedule.
- 47.70 % Retail
- 9.96% Industrial
- 30.91% Office
- 5.36% Redevelopment
- 0.93% Other
- 5.13% Cash*
* Includes cash, assets and liabilities.
Quarter 3 Financial Highlights
- Top 10 tenants account for 53% of rental income
- Rent collection rate of 97% to Q3 2018
- Attractive income yield of over 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): €575.3m
Property portfolio size: €488.1m
Annual rental income: €27.1m
Initial income yield: 5.06%
Vacancy rate: 4.50%
WALT: 7 Years
The economic outlook for 2018 and 2019 continues to remain strong with forecasted Gross Domestic Product (GDP) growth of 9% for Ireland for 2018 and 4.5% in
2019 (ESRI). This would make Ireland the fastest growing European economy in 2018. Irish unemployment is at 5.4% (CSO September 2018) boosting real income and driving the domestic economy. Brexit nerves remain however, as the March 2019 deadline approaches. The ISEQ was trading down 6% over the nine months to end of quarter 3.
Commercial property transaction volumes reached €2.6 billion Year to Date to quarter 3 2018, compared to full year of €2.5 billion in 2017. Quarter 3 volumes were 25% higher than the same period last year (JLL). 62% of transactions were by international investors; 42% of transactions were in the office sector and 90% of transactions were in Dublin(JLL). Take-up continues to be strong, particularly in the office sector. In contrast to the UK retail sector, the Dublin retail 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. Prime income yields have remained stable across retail (3.2%), office (4%) and industrial (5.5%) sectors in quarter 3 (Lisney), providing an attractive spread relative to Government bonds. Prime office rents are now at circa €700 per square metre, ahead of levels from the previous peak with the highest suburban rent achieved €355 per square metre (BNP Paribas).
The 12 month rolling performance was 5.54%. The Fund’s income profile is very attractive, with an initial income yield at the portfolio level of 5% and a WALT of over seven years. The top 10 tenants account for over 53% of the rental income. These tenants are of exceptionally high standard underpinning the Fund’s income stream.
Quarter 3 has been a busy period for the Fund completing two exciting acquisitions. City Point, Eyre Square, Galway comprises of office, retail and residential space, yielding over 6% for the Fund. We also acquired an industrial property in Magna Business Park, Citywest, fully let on a new lease with eight year term certain, with a reversionary yield of over 6%. We continue to source and analyse investment opportunities for the Fund and are in exclusivity on three assets which are at the late stages of due diligence. One of these assets, Carlow Retail Park, was acquired just after quarter end.
The redevelopment projects are progressing at pace. Construction is underway at Enterprise House which is on budget and on programme for completion in Autumn 2019. “Back of house” works at Blackrock Shopping Centre are complete and upgrade works are due to start in quarter 4. The refurbishment of Trident House commenced in July and interest from potential tenants is strong. In Royal Hibernian Way, upgrade of the common areas of the mall is underway. The anchor restaurant unit, Isabelle’s, has been handed over to the tenant (Press Up Group) for their fit out with a planned opening in November.
Work is ongoing on the second restaurant unit which will launch to the market shortly. Two new lettings at 23 Shelbourne Road have been agreed with DTCC Europe and Finance Ireland Credit Solutions, negotiations with additional interested parties are continuing.
CityPoint, Eyre Square, Galway
Friends First acquired City Point in quarter 3 2018. The exceptional six storey mixed use property on the northern edge of Eyre Square is yielding almost 7% for the Fund. It has a relatively short unexpired lease term which will present value add opportunities. The property comprises of office, retail and residential space, as follows:
- Retail space extending to 4,302 square metres (46,306 square foot) on the ground, first and part basement levels, let to TK Maxx and Galway Health & Fitness
- Office space extending to 2,139 square metres (23,024 square foot) on the second and part of the third floor levels, let to Mathworks and two software companies
- 17 apartments set out over part of the third floor and the entire fourth & fifth floors, let on a corporate lease to a local hotel operator
23 Shelbourne Road, Dublin 4
Friends First acquired the vacant property in the heart of Ballsbridge in January 2016 with the intention of adding value by upgrading it and letting it to a number of tenants. The property spans five storeys measuring 26,800 square foot. The building has an exclusive address in the established commercial hub of Ballsbridge. Following extensive refurbishments including upgrading of common areas and improving the entrance, it was remodelled to high specification offices. Interest from potential tenants was stong and initially Belgian Bank Belfius, FAMI (Financial arm of Ikea) and Scale Up Systems took space.
In quarter 3 2018 further lettings to DTCC Europe Limited and Finance Ireland Credit Solutions were agreed, which led to impressive uplifts in the value of the property in September, benefiting the Fund value and decreasing its vacancy rate. Negotiations with interested parties for a third lease are continuing. A small amount of space remains to be let; the size of the remaining floors is attractive to small or mid size companies, with financial and technical companies the core tenant base in the area.
In some tables and charts, due to rounding, the sum of the individual components may not exactly equal the stated totals.