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Property fund buy 50% of Bishops Square

{con_title} April 02 2003

Bishops Square is a six storey modern office block comprising 14,150 sq m prominently located at the junction of Kevin St, Aungier St and Cuffe St.

One of our most striking modern office blocks, it was developed by Bernard McNamara and Jerry O’Reilly who now retain the other half share interest.

The purchase price has not been disclosed. But market sources indicate that the consideration was over €45m, valuing the property at over €90m.

Two thirds of this building is let to the State and the various leases have a minimum of twenty years to expiry.

The line-up of “blue chip” tenants includes the Department of Social Welfare, Department of Foreign Affairs, Department of Justice, News International and others.

“Rental levels are reasonably conservative and we are confident that this purchase will provide the portfolio with a strong platform for growth over the medium and long term,” chairman Conor Sexton told the IPFPUT annual general meeting on Monday.

The purchase was completed in early January, but was contracted immediately prior to the Budget in December 2002 and thereby achieved a 3% saving in stamp duty. Chairman Mr Sexton revealed at the AGM that IPFPUT has been very cautious about purchasing properties in the current climate.

The Bishops Square stake was the only property the trust contracted to acquire during 2002.

Investment manager Niall Gaffney elaborated that IPFPUT realised office sales in excess of €50m last year, representing an average surplus on valuation of
approximately 10% on each sale.

Mr Gaffney commented: “Further to this strategic move, by acquiring a 50% stake in Bishops Square and selling pre-1980 offices, we effectively converted second generation stock with short term income profiles into third generation office stock that is characterised with rent and yield profiles that will provide greater scope for consistent future rental and capital growth.”

The outstanding performance of the trust last year was achieved through a combination of active portfolio management and a series of strategic sales.

Major highlight last year was the sale of Wilton Shopping Centre and adjoining lands to Tesco in a €70m plus deal. A further landmark deal was the sale of Roselawn Shopping Centre - also to Tesco - for 20% above valuation.

The IPFPUT investment expert added: “Following through on the further implementation of our investment strategy 2002-2005, we are likely to continue to rebalance the portfolio through acquisitions and disposals with a particular focus in 2003 on adding value to the portfolio through active management initiatives”.

“However, in the medium term, ie between 2003-2005, we would envisage targeting further investment into the retail sector as appropriate opportunities arise”.

“Performance prospects for 2003 could well be determined by extraneous geo-political factors rather than pure property market fundamentals. However, given the structural shift in global markets, property, as an asset class, given its relative out-performance over the past five years, should be well positioned to compete with the bond markets as a popular defensive haven for the flight of capital exiting from the consistent volatility of the equity markets.”

He added: “We believe that 2005 will see an improvement in market fundamentals that will assist in the stabilisation of overall positive long-term property returns. The current period to 2005 may well represent a period of consolidation for the property sector and also likely opportunistic plays for those willing to believe in the consistency of property returns.”