Credit Suisse dou­bles money on IFSC deal

Irish Independent - Business Week - - FRONT PAGE - John Mul­li­gan

A PRIME of­fice block in Dublin’s IFSC that was bought three years ago by a fund controlled by Credit Suisse has dou­bled in value.

La Touche House is now val­ued at €70m – that’s twice the price it was sold for in 2013 by a group of up to 78 pri­vate in­vestors that had been as­sem­bled by War­ren Pri­vate. Among those who were part of the syn­di­cate to buy La Touche House was for­mer Ire­land foot­ball man­ager Steve Staunton.

The surge in the build­ing’s val­u­a­tion starkly demon­strates the ra­pid­ity and scale with which the cap­i­tal’s of­fice mar­ket re­cov­ered fol­low­ing the crash.

The sale dur­ing the down­turn also un­der­scores how deals snapped up by out­side in­vestors have pro­vided mas­sive re­turns.

La Touche House was ac­quired in April 2013 by a Lux­em­bourg-based com­pany backed by a Credit Suisse fund.

Ac­counts for the Lux­em­bourg firm seen by the Ir­ish In­de­pen­dent demon­strate how quickly the build­ing’s value shot up fol­low­ing the pur­chase.

By the end of 2014, the build­ing was val­ued by Zurich-based firm Weust and Part­ner at €50.4m. By the end of 2015, that val­u­a­tion had soared to €70m.

Given the lack of prime of­fice space in the cap­i­tal, it’s likely that the val­u­a­tion has risen even since last De­cem­ber.

La Touche House was built in 1993 and formed the van­guard of the IFSC de­vel­op­ment. Bank of Ire­land bought it that year as a shell build­ing for €38m.

When the in­vestors as­sem­bled by War­ren Pri­vate queued up to buy it in 2002 for €82m, they were lured by tax breaks that en­abled them to off­set rental in­come against €48m in un­claimed cap­i­tal al­lowances. That was likely to re­sult in a tax break of about €100,000 per investor. Those in­vestors – in­clud­ing high-pro­file Ir­ish busi­ness peo­ple and pro­fes­sion­als – stumped up a to­tal of almost €25m to help fund the pur­chase. The re­main­der of the ac­qui­si­tion cost was pro­vided by means of non-re­course fi­nance from An­glo Ir­ish Bank.

The in­vestors sub­se­quently shared a €7m pay­out af­ter the prop­erty, lo­cated at the front of the IFSC, was re­fi­nanced with Bar­clays, giv­ing it an es­ti­mated value in 2007 of over €100m.

The six-storey block, which has a base­ment, is oc­cu­pied by high-pro­file clients, in­clud­ing Zurich Bank, Dexia Credit, Unicredit and others. It gen­er­ates an an­nual rent roll of about €4m.

The ac­counts for the Lux­em­bourg com­pany be­hind the build­ing show that a €1.3m div­i­dend was paid last year to the fund that con­trols the firm.

The Lux­em­bourg com­pany has also set aside an €11.3m pro­vi­sion for the likely tax due on the un­re­alised cap­i­tal gain, in the event of a sale, and based on the €70m val­u­a­tion put on the prop­erty at the end of 2015.

De­mand for prime of­fice space in Dublin re­mains strong. But Davy Stock­bro­kers noted re­cently that while credit is avail­able for spec­u­la­tive of­fice de­vel­op­ment, high mar­gins con­tinue to hit vi­a­bil­ity. It noted that con­straints in the avail­abil­ity and cost of labour and ma­te­ri­als are also emerg­ing in the con­struc­tion sup­ply chain, and that these fac­tors are de­lay­ing new com­mence­ment ac­tiv­ity.

A re­port last week from Knight Frank showed that the amount of of­fice space newly let in the Dublin mar­ket was 62pc higher dur­ing the first quar­ter of 2016 than a year ear­lier. The first quar­ter of­fice va­cancy rate fell to 8.3pc.

La Touche House, one of the prime blocks in Dublin’s IFSC, is val­ued at twice the price it sold for in 2013

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