Current market signals interest in Cork's multifamily unit sector

THE imminent sale of the Elysian tower development to an as-yet unconfirmed international fund, with 217 fully let apartments and commercial units at what’s understood to be a 5% return, may see a snowball effect of REITs and funds interested in Cork city’s multi-family unit sector.

Now for sale, City Square on Watercourse Road, Cork, comprises 125 apartments and 16 commercial units.

The expectation heightened this week as a 125-unit apartment scheme at City Square, in Cork’s Blackpool, comes to market with a €28m price tag quoted by agents Savills, at a 5.5% net initial yield. City Square is fully let on the residential side, and has a current income of c €2m, with scope to boost that through rent reviews, and the letting of vacant commercial/retail space.

City Square, developed on a three-acre brownfield site on Watercourse Road by Frinailla and completed in 2007 at a reported cost of €50m (it initially had c 145 apartments but a number have since sold privately), is 500 metres from St Patrick’s Bridge and the city centre, and rents recently achieved range from €1,200 per month to €1,700 for three-beds.

The development, in three blocks of two to five storeys and designed by Kiosk Architects, has 36,000 sq ft of commercial space across 16 units. A number of new deals have completed recently, bringing current rent for commercial/retail space to €177,000, on top of €1.81m income from the apartments.

Agents Isobel O’Regan and Chris O’Callaghan of Savills Cork say “the multi-family market has established itself as one of the most sought- after investment mediums within the Irish property sector in recent years. City Square is an excellent value-added multi-family opportunity, due to the continually increasing demand for rented accommodation in Cork city centre.

The imminent sale of the Elysian (above) and, now, City Square coming to market signals an uptick in interest.Picture: Larry Cummins

The €28m sale comes as moves to sell The Elysian are advacing with joint agents Lisney and Savills for owners Blackstone, with a shortlist whittled down to three in recent weeks. Although no deal has been agreed in full, there are reports that US-based giants Kennedy Wilson is now Blackstone’s preferred bidder, as talks wrap up.

Property sources say that after recent international stock market wobbles, and a global reappraisal of property as an investment vehicle, the level of competing interest may drive the yield at the high profile and very high quality O’Flynn Construction-developed Elysian down below the 5% level. The overall combined residential/income from the Elysian may be close to €5m, so a deal could be in the €80/90m bracket.

If, as expected, the Elysian sells to internationally-funded buyers like Kennedy Wilson, it’s anticipated that other substantial multi-let offers in Cork may also go to a similar profile of buyer, some of whom may wish to establish a sizeable income stream and investments outside of the very competitive Dublin market.

Already, the California- based global real estate fund Kenney Wilson (with a reported $18bn in property assets) controls over 1,000 apartments in Dublin, including those at the slender 16-storey Alto Vetro tower of just 26 apartments.

The City Square sale has been expected for over a year (the 2007-completed development had been taken over by a bank-installed receiver several years ago), and the time-lag is likely to be to the benefit of the sale outcome.

According to Savills’ James O’Donovan and Isobel O’Regan, “City Square’s impressive appeal is reinforced as the passing rents are considerably below market rent, in addition to the income enhancement potential of the commercial accommodation.

“With few opportunities of this calibre available in the multi-family market in Cork, Savills expect very good interest in this asset.”

Details: Savills 021-4271371

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