High-yield prop­er­ties will see strong in­ter­est from in­vestors

Irish Independent - Business Week - - COMMERCIAL PROPERTY - Donal Buck­ley

TWO in­vest­ment prop­er­ties with at­trac­tive yields, which could ap­peal to pri­vate in­vestors, have been brought to the mar­ket this week by agents TWM.

The in­vest­ments com­prise a Gal­way tourist hos­tel with a po­ten­tial 8.3pc net ini­tial yield (NIY) and a Drogheda ware­house with a 12.63pc prospec­tive NIY.

The hos­tel, known as Sleep­zone Hos­tel Gal­way, is sit­u­ated on Bóthar na mBan just 350 feet from Eyre Square in Gal­way city cen­tre.

Pur­pose-built, the hos­tel ex­tends to ap­prox­i­mately 1,035 sq m (11,151 sq ft) and is laid out in­ter­nally to pro­vide re­cep­tion, break­fast room, com­mu­nal liv­ing room, com­puter room and dor­mi­tory ac­com­mo­da­tion with a to­tal of 192 bed spa­ces.

TWM are seek­ing of­fers in ex­cess of €1.5m and with a cur­rent pass­ing rent of €130,000 per an­num, this sug­gests a NIY of 8.3pc, as­sum­ing stan­dard pur­chase costs of 4.46pc.

It is let to Sleep­zone, a long-es­tab­lished Gal­way hos­tel op­er­a­tor, un­der a 21-year lease from April 2001 which sug­gests that there is less than four years to run.

The prop­erty is eas­ily ac­ces­si­ble from all parts of the city and Ceannt train and bus sta­tion, to­gether with the tourist of­fice. Pri­vate tour op­er­a­tors and the well-known lo­ca­tion of Quay Street are lo­cated within a one-kilome­tre ra­dius.

Sarah Win­ters of TWM is han­dling the sale and com­ments that the in­vest­ment of­fers a great op­por­tu­nity for in­vestors in the mar­ket, given the as­set man­age­ment po­ten­tial at lease end with this prop­erty and aided by the con­tin­ued growth in tourism in the Gal­way mar­ket.

“With the lure of Con­nemara’s rugged land­scape or the buzz of Quay Street on a sum­mer’s af­ter­noon, Gal­way is one of Ire­land’s most pop­u­lar tourist des­ti­na­tions, with strong de­mand for ac­com­mo­da­tion rang­ing from hos­tels to five star ho­tels,” she adds.

Its scale and pur­pose-built na­ture may also ap­peal to in­ter­na­tional hos­tel op­er­a­tors which have been seek­ing th­ese types of prop­er­ties in Ire­land and in ma­jor tourist des­ti­na­tions. Such in­ter­est is not just due to Ire­land’s bur­geon­ing tourist in­dus­try, but also to travel by young peo­ple in the 18-35 age group which is on the in­crease. The United Na­tions World Tourism Or­gan­i­sa­tion pre­dicts 370 mil­lion of them will be on the move world­wide by 2020.

As a re­sult, Col­liers In­ter­na­tional be­lieves hos­tel rev­enue growth will in­crease glob­ally at an an­nual rate of 8pc.

But in Ire­land, as in many coun­tries, the mar­ket is also very frag­mented and still dom­i­nated by small, in­de­pen­dent op­er­a­tors.

The Drogheda ware­house is let to Har­vey Nor­man, the elec­tri­cal and fur­ni­ture re­tail chain, and not alone could it gen­er­ate a 12.63 pc NIY but it also of­fers up­ward-only rent re­views.

Lo­cated at East Coast Busi­ness Park, the prop­erty com­prises two modern in­ter­con­nected ware­house units ex­tend­ing to 2,247 sq m (24,187 sq ft).

Har­vey Nor­man Leas­ing (Drogheda) Lim­ited are the ten­ants on a 20-year lease from May 2007 with a break op­tion in year 15.

TWM are seek­ing of­fers in ex­cess of €1.4 mil­lion, which equates to a cap­i­tal cost of €623 per sq m (€57 per sq ft). Its cur­rent an­nual rent is €184,640.

Michele Jack­son at TWM com­ments that the in­vest- ment of­fers buy­ers “a great high-yield­ing op­por­tu­nity at a price well below the build cost”.

“The se­cure in­come has the ben­e­fit of a strong par­ent com­pany guar­an­tee.”

East Coast Busi­ness Park is close to the M1 mo­tor­way which pro­vides good con­nec­tiv­ity to the Dublin Belfast cor­ri­dor as well as to the ar­te­rial routes ra­di­at­ing around the cap­i­tal.

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