Hibernia's Dublin sale leads to debut capital recycling event

Irish REIT Hibernia has sold an office property in Dublin for €35.5 mln, and announced a €25 mln share buy-back programme, representing the first capital recycling event of its kind for a Dublin-listed REIT. 

Hibernia said it the price was 'modestly ahead of the December 2018 book value' for 77 Sir John Rogerson’s Quay, reflecting a net initial yield of 4.6% and a capital value of €1,040 per ft2.

Kevin Nowlan, Hibernia's CEO, said: 'We acquired 77 SJRQ in early 2018 and simultaneously agreed to let the entire building to IWG on a long lease. This, together with the improving surroundings in the eastern end of the South Docks, has resulted in a significant uplift in value during our ownership.

'The sale allows us to concentrate on our larger investments and our development pipeline. We intend to return the net proceeds of €35 mln to shareholders to maintain our progress towards our leverage target, starting with the €25 mln share buyback programme we have announced today.'

The property comprises 34,400 ft2 of office accommodation and 20 parking spaces. It is fully let to International Workplace Group (IWG), producing rental income of €1.8 mln per annum to next rent review and 14 years term certain remaining.

Hibernia said that the sale gave it an ungeared rate of return on the investment of more than 15%.

First Irish capital recycling event
Irish analyst Goodbody said: 'Hibernia is currently trading at a 22% discount to its last published NAV of 170c and has taken advantage of the fact that it can dispose of assets, such as 77 Sir John Rogerson’s Quay, at a (modest) premium to book value given current market conditions.' It described the share buy-back programme as 'the first capital recycling event for an Irish reit'.

According to Hibernia, the share buyback programme will commence on April 2 and will continue until December 31.

The analyst added: 'Institutional investor demand remains robust for income-producing Dublin office assets, especially from European institutional investors, and keen prices continue to be paid, as evidenced today by this disposal. Hibernia is taking advantage of this opportunity.' Meanwhile 'the buyback is a logical move to drive shareholder value, given it can dispose of assets at a premium to the last NAV and buyback its own shares at a discount.'

However, Goodbody noted Dublin's tightening supply dynamics for office properties were having an effect.

'The buyback also suggests accretive investment opportunities, that match Hibernia’s requirements, are now more limited in the Dublin office market, as pricing is being driven by European institutional investors with lower costs of capital and more modest total return objectives', the analyst concluded.


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