Quarter 1 Activity
- Letting of Trident House, Blackrock to Zurich.The entire building is let to the company from January 2019;
- Completion of Royal Hibernian Way impressive shopping mall upgrade. Planning submitted to redevelop Block ‘C’ for office use;
- Blackrock Shopping Centre redevelopment has commenced and is progressing well.
- 42% Retail
- 9% Industrial
- 31% Office
- 12% Redevelopment
- 1% Other
- 5% Cash*
* Includes cash, assets and liabilities.
Quarter 1 Financial Highlights
- Over 70% of the property portfolio is held in core, income producing investments;
- Strong performance of 6.8% for 12 months to the end of Q1; the best performing unit linked Irish property fund over this period;
- Attractive income yield almost 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): €605.6m
Property portfolio size: €534.3m
Annual rental income: €29.7m
Initial income yield: 4.9%
Vacancy rate: 3.5%
WALT: 7 years
Economic growth in Ireland performed at the fastest pace in Europe for a fifth consecutive year in 2018. The labour market continues to strengthen with unemployment now at 5.4% (Central Statistics Office March 2019).
The Economic and Social Research Institute (ESRI) reported Gross Domestic Product growth of 6.7% for 2018 and 3.8% in its outlook for 2019. In their March commentary they caution that Brexit uncertainty could have a significant impact on the Irish economy. To date we have seen a benefit to commercial property markets in the Dublin office and industrial sectors. IDA Ireland reported that 70 Brexit related moves or expansions within Dublin have been approved. According to research by E&Y Global, Ireland is leading the race for Brexit related relocations in the finance sector, placing it ahead of Frankfurt, Paris and Luxembourg.
Prime income yields have remained stable across retail (3.2%), office (4%), and industrial (5.2%) during Q1 2019 (Lisney). Property yields continue to provide an attractive spread relative to Government bonds. Take-up in the office sector in Quarter 1 2019 was the highest Quarter 1 on record for the Dublin office market. Almost a third of office take up occurred in the suburbs, primarily in South Dublin (CBRE). In contrast to the UK retail sector, the Dublin retail market remains resilient with retail sales increasing by over 5% year on year to February 2019. The industrial sector remains attractive to investors, with strong demand for logistics reinforced by the continued expansion of online retail.
In contrast to the UK retail sector, the Dublin retail market remains resilient with retail sales increasing by over 5% year on year to February 2019. Consumer spending rose by 3% in 2018. The ‘Blue Building’ occupied by Next on Henry Street sold in March above its asking price, demonstrating continuing interest in Dublin prime retail properties. The industrial sector remains attractive to investors, with strong demand for logistics reinforced by the continued expansion of online retail. Prime office rents remain stable at c.€700 per square meter (€65 per square foot). Prime Industrial rents are now at €106 per square meter (€9.85 per square foot). Prime retail is trading at €6,500 per square meter (€605 per square foot).
The 12 month rolling performance of the Fund was 6.81%, the best performing Irish unit linked property fund over this period. The Fund’s income profile is very attractive, with an initial income yield at the portfolio level of almost 5% and a weighted average lease term (if all break options are exercised) of almost 7 years. The Top 10 Tenants (by rental level) account for over 50% of the rental income. These tenants are of exceptionally high standard (Woodies, Musgrave, Disney and the OPW for example).
Quarter 1 was an active period for the Fund. In Royal Hibernian Way, the upgrade of the shopping mall was completed. We are in advanced negotiations with a tenant for the letting of the second restaurant unit. Planning permission has been submitted to Dublin City Council to redevelop ‘Block C’ off Duke Lane for office use. In Blackrock, the Enterprise House redevelopment continues at pace. The shell and core of the building are complete with electrical and mechanical fit outs commencing. Works are progressing on budget and on schedule. Redevelopment works have commenced on Blackrock Shopping Centre which will include the installation of bespoke glazed roof and an additional storey of accommodation. Trident House, Blackrock has been let in its entirety to Zurich since January 2019. Planning permission has been submitted for reconfiguration works of 1 Coppinger Row restaurant and 57 South William Street (currently being used for ‘pop up’ shops, generating strong short term income) to expand the restaurant, kitchen and dining area into the basement of 57 South William Street. In Galway, two successful asset management strategies were realised. One was the removal of a break option on TK Maxx’s lease in Citypoint, this has benefited the Fund by extending the term certain to this anchor unit and increasing the value of the underlying asset. The second was the successful conclusion of a positive rent review agreed with Cisco Systems, the tenant at Ard Oran.
Trident House, Blackrock, Co. Dublin
Trident House on Rock Hill in Blackrock Village, forms part of our Blackrock portfolio. The portfolio comprises of the adjacent Blackrock Shopping Centre which is undergoing an impressive upgrade, and Enterprise House which has been demolished and is now being rebuilt into Grade A ‘headquarter’ style offices, pre-let to Zurich. Office rents in the Dublin suburbs are currently at levels that are at least half those of prime city centre locations. South Dublin has been the main beneficiary of increased demand and our Blackrock office properties are well positioned to take advantage. The Blackrock redevelopment projects are targeting ‘LEED Gold’ standard (LEED or Leadership in Energy and Environmental Design, is the most widely used green building rating system in the world) demonstrating our ongoing commitment to improving the energy efficiency and green credentials of our portfolio.
Trident House is made up of 18,800 square foot of prime suburban office space. It is a four storey over basement building, with stunning views over Dublin Bay, which includes 21 car parking spaces. A €2.5m LEED Gold standard refurbishment of the office accommodation completed in December on time and within budget resulting in gains for the Fund. High quality covenant tenant Zurich commenced their lease in January 2019.
Block A & D Ashtown Gate, Navan Road,
Block A and D Ashtown Gate are modern office buildings located opposite the Ashtown Gate entrance of the Phoenix Park, on the Navan Road, Dublin 15. The multilet offices are well served by transport links and are within minutes walk from Ashtown train station, the Phoenix Park and the M50/N3 Motorway. The properties form part of the Ashtown Gate Office Complex which is home to an impressive number of strong government tenancies including the Criminal Assets Bureau (CAB), Revenue Commissioners, An Garda Siochana, the HSE and Waterways Ireland. Block A is occupied by the HSE and Viridian (almost 22,500 square foot) and the larger Block D is leased to the Office of Public Works (OPW), (67,329 square foot). The properties are a fine example of core income producing properties with a strong income yield (7% and 10% respectively) with secure high quality government tenants. The properties were acquired by the Fund in April 2016 and have experienced impressive capital appreciation since then.
In some tables and charts, due to rounding, the sum of the individual components may not exactly equal the stated totals.