€70 Million sale of 420 apartments in Clancy Quay, Islandbridge, D8

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DK10/04/2013Irish Times today:

A new development of 420 apartments on the site of the former Clancy Barracks overlooking the River Liffey at Islandbridge, Dublin 8, goes for sale today as a single investment with a guide price of €70 million. It is the largest ever sale of its kind in the city.

By last weekend, 228 of the multi-family apartments at Clancy Quay had been rented; another 42 were in the process of being let; and a further 138 units were ready to go on the rental market as soon as a new owner emerges and supplies soft furnishings. The remaining 12 penthouses are still in shell and core condition.

The current rent roll equates to €3.17million per annum and by the time the remaining apartments are let and tenants are found for a range of commercial buildings, Fergus O’Farrell of Savills estimates that the overall rent should grow to €6.8 million. At a guide price of €70million, the gross yield is expected to be around 9 per cent even before an up-to-date valuation is obtained for the remaining 8.45 acres which have full planning permission for an even greater number of apartments than in the first phase as well as a 15-storey hotel.

The hugely ambitious development was led by Jersey-based builder David Kennedy and had reached an advanced stage of construction when the property market collapsed in 2008. Clancy Quay Properties were financed by the UK Lloyds-owned Bank of Scotland (Ireland) and the Danske Bank subsidiary, National Irish Bank. The developer paid €25.4 million for the 13.5-acre 19th century army barracks and by the end of 2008 the site had a carrying value of €190 million, according to an auditor’s report.

The current level of debt to the two banks has not been disclosed but is thought to be around €230 million.

Since their appointment as receivers Stephen Tennant and Paul McCann of Grant Thornton have transformed the building site into a vibrant new residential enclave with a pedestrian friendly layout for the newly arrived tenants. A range of shops and restaurants and a gymnasium are also ready to be let.

Savills expect that the sale of what it the largest distressed residential complex in the city could possibly attract up to 10 bidders, including a range of UK, US and German funds.

The American property investment and services firm Kennedy Wilson is likely to lead the charge following its acquisition of two other fairly similar city properties – it paid €27 million for 123 apartments and coach houses at Sandford Close, Ranelagh, and €40 million for 210 apartments in The Alliance Building at the Gasworks in Ringsend.

Other investors likely to chase Clancy Quay are US property investors Hines; the UK’s Delancey Real Estate Management; the Galway-born Comer bothers who are also based in Britain and the Israeli businessman Eyal Bor who recently paid €9.6 million for 62 rented apartments at Park Lodge on North Circular Road.

There are several Irish property companies in a position to bid for the investment and the extensive adjoining site including Frank Fahy of Shannon Homes, Dublin, who managed to offload most of his newly-built housing stock before the market took a nosedive.

Those chasing the investment are likely to put a value of at least €7 million on the adjoining site and the range of commercial units which have been completed.

If that figure proves accurate, the apartments will work out at an average cost to the purchaser of €150,000 – a long way from the prices set when the scheme was offered for sale off the plans in April, 2007. One-bed apartments were priced from €370,000; two beds started at €480,000 while three-beds were available from €585,000.

Virtually all of the 420 apartments are located in 12 blocks varying in height up to eight storeys above ground. There is a vast car park with 560 spaces on two levels underneath the blocks.

Two of the period army buildings in the first phase have been tastefully redeveloped as luxurious apartments and offices. As part of the restoration project, the original central square is due to be reinstated as a public place.

A great many of the apartments look directly across the River Liffey to the Phoenix Park and the Hill of Howth in the distance.

Heuston Station is also a short distance away and the Royal Hospital at Kilmainham dominates the view in the opposite direction.

The first phase includes 122 one-bedroom apartments, 206 two-bedroom units, 90 three-bedroom homes and two four-bedroom apartments.

The strong rental market in the city and the high quality fit-outs in all the apartments has meant that not only are they easy to let but they are attracting better than expected rents of €1,100 for one beds; €1,400 for two-beds and €1,650 for three-beds.

The high level of interest by tenants is expected go grow further when commercial buildings allocated for a gymnasium, shops, restaurants, medical centre and offices open for business in the coming weeks.

About 3,408 sq m (36,683 sq ft) of commercial space has been completed in the first phase. The barracks wall along South Circular Road is due to be replaced by new shops which will open up the development to the Kilmainham community.

Military buildings
With planning permission on the entire site now extended to July 2016, Clancy Quay could end up as the largest apartment development in the city with a total of 883 homes.

Many of the units in the second and third phases will be provided in 10 military buildings listed for preservation.

Though An Bord Pleanála also gave the go-ahead in 2006 for a 10- to 15-storey hotel block with 194 bedrooms in the southwest corner of the site there is considerable doubt that it will now proceed in view of the difficult trading conditions experience in recent years by hoteliers on the outskirts of the city. In addition there is a Hilton Hotel close to the rear of the site.

New residents at Clancy Quay can avail of a regular bus service into the city centre and can also use the Luas stop at Heuston Station which is little more than five minutes’ walk from the site.