Overview

Q2 started with limited supply threatening to

hold back activity. However, this was not the

case with market turnover exceeding €670m

in the three months. While this is less than the

previous quarter when turnover was €1bn, it is

behind Q2 last year (€730m) but in the context

of the Irish market generally, is a healthy level

of activity. The prime markets remain very

active but sales of many non-prime investment

properties are taking longer to complete due

to increased scrutiny by advisors. Loan sales

from various lenders are holding back supply of

properties to the market.

Activity

Activity slowed slightly in Q2 following the

very strong opening months of the year. This

was due to many sales carrying over from

2014, which inflated Q1 activity. A greater

proportion of activity is happening in regional

and other non-prime markets. There are a

number of reasons for this including the fact

that this is where the banks still hold stock.

Many investors believe there is now greater

value in regional cities and that there is

greater scope for growth in these markets.

Set out below are some of the larger sales

during the quarter:

Retail

• The Cornerstone Portfolio of six regional

shopping centres (Orwell SC, Athlone

Town Centre (plus 150 apartments), Tipp

Town SC, MacDonagh SC, Gorey SC,

and Westside SC) was sold to Davidson

Kempner by receivers appointed by AIB bank

for a price in the order of €117m / net initial

yield of 7.2%.

• Manor West shopping centre and retail park

in Tralee was sold to Marathon for €58.6m.

• Four regional shopping centres from the

Harvest Portfolio (Dungarvan SC, Thurles

SC, Harbour Place SC and Johnstown SC)

were sold by NAMA for close to €40m.

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Turnover

Exceeded €670m in Q2.

Supply

Improved as the quarter

developed.

Pricing

Prime yields continued to

fall.

Multi-Family Investment: 21 apartments as part of the Ice Rink development in Dolphin’s Barn is currently for sale guiding €3.2m.

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2nd Quarter 2015

2

• Navan Retail Park was purchased by

Target Investment Opportunities for

€11.5m.

Offices

• A 70.8% interest in one of Dublin’s

finest office buildings, Riverside I let to

McCann Fitzgerald, was sold to IPUT

for a reported €80.5m. The rent is due

for a review in October 2016 in what

will be a very high profile test of the

treatment of rents set on leases with

upward/downward review mechanisms

being used as evidence in an upward

only lease review.

• The Royal College of Surgeons in

Ireland sold Beaux Lane House to the

German fund Real IS for €60.5m.

• Green REIT committed to buy One

Albert Quay, a 15,420 sqm office

development that is under construction

in Cork city centre. The building is part

pre-let to PwC and Tyco with the sale

price to be decided once the property

is completed but will range between

€55m and €58m.

• Irish Life purchased George’s Dock 2

in the IFSC for €35.5m. The property

is let to Susquehanna and DeLaga

Landen (on a sub-let from Rabobank).

Industrial

• The Avid Building on Carmanhall Road

in Sandyford was bought by a private

investor for €6m at an initial yield of

12.8%.

Multi-Family

• Tyrone Court, a scheme of 92

apartments in Inchicore, was sold off-

market to IRES for €19.45m.

• The majority of the assets in Project

Plum (units at Northern Cross) were

sold to Marathon for a reported

€18.4m, giving a net initial yield of

5.8%.

There were also a number of other

noteworthy transactions close to being

completed at quarter end but will form

part of Q3 figures. Of particular note

is Royal London’s Sovereign Portfolio

of 13 properties (high quality retail with

some more secondary offices), which

combined, are producing €7.4m per

annum in rent. We understand a sale of

the entire has been agreed to Irish Life

for a reported figure of €154m (30%

ahead of the guide price). Additionally,

City Square Shopping Centre in

Waterford is close to being concluded

for approximately €22m. In Cork, Green

REIT committed to buying One Albert

Quay, a 15,400 sqm office development

that is currently under construction.

The building is part pre-let to PwC and

Tyco with the price understood to be

approximately €55m, but may increase

depending on the final letting position on

completion. A US investor that bought

early in this cycle has taken a profit

and resold Park Lodge, a block of 62

apartments close to the Phoenix Park,

to Patrizia for €15.25m. There remains

very limited activity in the industrial

sector. The lack of investment grade

letting in the last cycle has left very

limited scope for supply to come to the

market. During Q3, the sale of the VWR

facility in Ballycoolin will close following

a deal being completed towards the

end of Q2 to a UK based investor for

a price well ahead of the asking after

competitive bidding.

Supply

The quarter started with limited supply

and while the amount of investment

product on the market increased in April

and May there was a lack of quality stock

on the market at the end of Q2 (€880m

of assets were on the market at the end

of June). Part of this is due to NAMA,

Lloyds and Ulster Bank (RBS) putting

or about to place large volumes of loans

secured by property into the market.

Much of the planned supply for Q3 has

been delayed pending these loan sales,

possibly until later in the year or even

2016.

Nevertheless, in terms of notable

opportunities that did come to the

market and remained on sale at the end

of June, examples included the National

Portfolio (retail parks in Letterkenny,

Tullamore, Killarney and Nutgrove

in Dublin) guiding €162m; Block R

Spencer Dock (let to the Central Bank,

the OPW and Nationwide UK); the Bank

Portfolio (12 branches at €48m) and the

recently opened Lifestyle unit on Grafton

Street (€16m).

NAMA placed the long anticipated

Project Jewel on the market as the

quarter drew to a close. This is a

Thurles Shopping Centre, one of four regional centres included in the Harvest Portfolio, which sold for close to €40m in Q2

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St. Stephen’s Green House, Earlsfort Terrace, Dublin 2 T: +353 1 638 2700 E: dublin@lisney.com

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1st Floor, Montgomery House, 29-33 Montgomery St., Belfast, BT1 4NX T: +44 2890 501 501 E: property@lisney-belfast.com

Aoife BrennanDivisional DirectorE: abrennan@lisney.com

Lisney Research Lisney Investment

Ann HargadenChairmanE: ahargaden@lisney.com

Duncan LysterDirectorE: dlyster@lisney.com

Anne-Marie SheehanDivisional DirectorE: asheehan@lisney.com

Christopher BeltonDivisional DirectorE: cbelton@lisney.com

Yvonne Kiernan Chartered SurveyorE: ykiernan@lisney.com

JP Flynn Chartered SurveyorE: jpflynn@lisney.com

Maria Lennon SurveyorE: mlennon@lisney.com

PS

RA

No:

001

848

Hugh LinehanHead of Investment FundsE: hlinehan@lisney.com

property-backed loan sale with a reported outstanding balance

of €2.4bn and contains Dundrum Town Centre, a 50% interest

in the ILAC Shopping Centre on Henry Street, a 50% interest in

the Pavilions Shopping Centre in Swords and the Dublin Central

redevelopment site. Given the size of this portfolio, some of the

loans or potentially the underlying assets, may be broken up and

resold.

Pricing

Prime pricing continued to move forward in Q2 although there

are signs that the exuberance at the private investor end of the

secondary market has cooled somewhat. In the prime market,

equivalent yields for the best retail investments in Dublin have

moved below 4% for the first time in seven years to 3.9%. For

the best office opportunities, prime yields moved below 4.25%,

similar to peak levels, driven on by the prevailing constraints in

the letting market. There is a lack of clarity on prime industrial

pricing given the lack of transactions in this sector but we

estimate that prime yields are in the order of 6%. Good quality

multi-family investments are trading at gross yields in the region

of 7%. At the end of June, yields were well below their long-term

averages.

The table above shows the recent movement in prime Dublin

equivalent yields in addition to the 35 year long-term average.

Outlook

• Demand remains strong with some new US and European

investors with long-term hold strategies entering the market.

• Total market turnover is likely to be close to €3bn by year-end.

• Supply may be constrained by the volume of loan sales ongoing

but some notable opportunities will come to the market. Larger

examples include the majority of the Elm Park development and

Project Cobalt.

Thomas ByrneGraduate SurveyorE: tbyrne@lisney.com

Q2 2015Quarterly Change

Annual ChangeChange from Cycle High

(Q1 2012)

35-Year Average

(1980 – 2015)

Retail 3.90% -10bps -85bps -300bps 5.00%

Office 4.25% -50bps -65bps -355bps 6.00%

Industrial 6.00% -25bps -100bps -300bps 8.50%