Here's What The Receivership Of A €104M Meta Office Means For Dublin
If ever there was a scheme that reflected the roller coaster ride that Dublin’s commercial real estate market has been on over the past 15 years, then it is The Beckett building.
Developed just as the Celtic Tiger economic miracle imploded and vacant for years, it was then bought on the cheap, leased to a tech titan, sold at a substantial premium to South Korean buyers and is now in the hands of receivers. The 188K SF building between the city’s north docks and the M50 motorway is under the control of Grant Thornton after it was appointed by German lender Helaba.
The receivership is the biggest insolvency of the current cycle and comes as 73-83 Mount Street is being sold by Iput at a 20% discount to its €37.5M February guide price to businessman Laurence Goodman.
There are unique factors that mean The Beckett's receivership is not necessarily a harbinger of wider distress. But it highlights how far values will fall for some assets and owners.
“The Beckett building is something of a unique situation, and I don’t believe the market will see this as a bellwether,” Colliers Associate Director of Capital Markets Stephen Conway said.
“There are a number of factors that have seen this one underperform in the current climate — the tenant is reportedly not happy with the location, and it’s a big lot size for what would be considered a fringe CBD office location. With the occupier market softening, one would expect the pool of potential occupiers for this space to be pretty shallow at present.”
Grant Thornton confirmed to Bisnow that Nicholas O’Dwyer and John Boland of Grant Thornton had been appointed joint receivers to Beckett Acquisitions Ltd. by Landesbank Hessen-Thüringen Girozentrale, or Helaba, on 6 September 2023.
“No further comment can be made on this matter due to client confidentiality,” the company said.
Developed originally in 2007 by Zoe Developments, headed up by the late Liam Carroll, The Beckett was caught up in the property crash and lay empty until 2013 when it was sold on the instructions of receivers acting for the Bank of Scotland to Comer Group for €5M.
Comer is understood to have spent a further €30M on the building’s fit-out before letting it to Facebook, now Meta, on a 15-year lease and selling it to South Korean-based Kookmin Bank, advised by Lambert Smith Hampton and Knight Frank Investment Management, as a long-term investment for €104M.
"The acquisition offers secure income at an attractive rental and capital value level, which we believe provides solid future performance prospects," KFIM partner Ric Crane said at the time of the deal.
The lease is due to expire in 2032, with a break option in 2027, but cost cuts caused by falling revenues have seen Meta consolidating its workforce in Dublin into newer buildings. In December, it started to sublease part of its European HQ at Fibonacci Square.
Market sources told Bisnow that the location of the Beckett Building, largely occupied by back-of-house staff, has not been popular with employees and there is likely to be a phased exit to other Meta facilities in the city, most likely at Sandyford.
Meta did not respond to a request for clarification from Bisnow.
Earlier this year, Kookmin instructed agent CBRE to ready the offices on Dublin’s East Wall Road for sale, and the bank was understood to be looking at a guide price of €80M, significantly down from its purchase price.
However, it is believed that bids came in at around €50M.
“Conversion to residential is a clear fallback position, but construction costs for conversion would likely be prohibitive, which again underlines why potential suitors may have reportedly offered lower prices to give themselves some headroom,” Colliers' Conway said.
Korean Investment In Dublin
Another question is whether it will have a negative impact on overseas investment sentiment — The Beckett is not the only asset acquired by Korean investors to see a once-strong tenant hit difficulty.
Charlemont Exchange, a seven-floor office building at Grand Canal in Dublin, was acquired from Marlet Property Group in a deal valued at €145M in early 2019, with Savills Investment Management advising on the acquisition on behalf of a group of Korean investors managed by Vestas Investment Management.
Meanwhile, on behalf of the Korean Hana Financial as investor and JR AMC as Korean asset manager, KanAm Grund REAM bought the eight-storey Dublin Landings 2 project in December 2018 for €106.5M.
Both are strong assets. Less helpfully, both signed 20-year leases with the now-deeply troubled flexible workspace provider WeWork.
“Overall, Korean investment in Dublin looks to have been pretty mixed,” Conway said. “The Tesco distribution centre in Donabate, acquired by KTB Investments for €160M in 2019, is an excellent logistics acquisition, while No 2 Dublin Landings and Charlemont Exchange comprise quality real estate in excellent CBD locations, although the deterioration of the covenant takes the gloss off.”
Korean investors have continued to look at Ireland. More than a dozen leaders of local securities firms recently traveled to the UK and Ireland on a fact-finding mission to inspect potential business opportunities and risk factors in their real estate markets, according to The Korea Times.
Korea Financial Investment Association Chairman Seo Yoo-seok and a group of 17 CEOs from local agents traveled as part of an annual event by the New Portfolio Korea programme. The group visited Dublin to meet with officials from inward investment organisation the IDA Ireland and, according to The Korea Times, had a meeting with Savills and Hines to discuss the market.
“The price gap between vendors and sellers has continued to keep the Dublin market quiet, although there is a sense of some narrowing between bids and offers, which suggests we may begin to see more movement in the coming months,” Conway said. “There are very few distressed sellers, but with more refinancing on the horizon, some owners are looking to get ahead of that and may choose to align their pricing to make assets more attractive.”
On the leasing front, JLL’s most recent report for the second quarter noted that demand for Dublin office space had increased quarter-on-quarter, after one of the city’s lowest quarterly takeup levels in Q1. In all, 408K SF of office space transacted through 54 deals in Q2, with the first half totalling 680K SF.
Increased activity suggests that some occupiers are starting to settle on their future spatial requirements, JLL said, adding that it expects demand to translate into transactions in 2024.
“Having regard to all of the moving parts in the market — pipeline completions and demolitions on the supply side, jobs growth projections and space-per-employee ratios on the demand side — I expect Dublin office vacancy to peak towards the end of this year or in the first half of 2024,” BNP Paribas Real Estate Director and Head of Research John McCartney said.
“Rents will remain under pressure, but this approximate time scale should pave the way for rents to stabilise in 2025 and for a resumption of growth in 2026.
“Speculative construction starts effectively ceased in 2022, and it is likely to be some years before the next development cycle kicks off,” he added.
That may offer some crumbs of comfort for Helaba as it works out what to do with The Beckett. While a lack of new supply not already pre-let is likely to start to squeeze supply in the market, the offices will need refurbishment if they are to become attractive to a new tenant.
KB Securities, LB Asset Management, Helaba and Meta did not respond to requests for comment.
CORRECTION: SEP. 22, 5:45 A.M. ET: A previous version of this story had an error in the name of Colliers Associate Director of Capital Markets Stephen Conway. The story has been updated.