Bulk buyers flood the property market as investors pile into major portfolio deals
Published 09/04/2015 | 02:30
More than 6,200 the numbers of apartments and houses have been bought by bulk buyers in deals worth more than €1.18bn since the beginning of 2012, and the rate of buying shows little sign of slowing.
The largest of the bulk buys was Mars Capital's purchase of more than 1,000 apartments and houses in a deal which Savills marketed as Project Venus with a €143m guide price.
All of the properties were residential buy to lets and included houses, flats, some small blocks as well as Pre-'63 types of properties.
The properties were being sold on the instructions of a receiver appointed by Bank of Ireland. About 280 of them are in Dublin city, with an average value of €285,000, 152 in Cork, 83 in Galway and 43 in Limerick.
Mars Capital is an affiliate of the giant US firm Oaktree, Capital which is also adding to its Dublin residential portfolio with a number of new developments including 158 apartments at the Reveal development in South Docks and a student housing project in the Digital Hub.
Meanwhile Marathon Asset Management's (MAM) purchase of the 588 apartment Project Plum for €116m, adds to its Dublin portfolio.
Last year MAM acquired loans on the Heuston South Quarter, development near Heuston Station for around €130m giving it control of a mixed portfolio which includes a number of different types ofproeprty. Included in the deal were 264 flats, 80,000 sq ft of office space and about 78,000 sq ft of mixed commercial and retail space.
Project Plum will extend MAM's reach to a further seven schemes which are currently producing a rental income of €7.43m and the agents Savills and DTZ Sherry FitzGerald say this figure could be increased to around €8.7 million through improved asset management.
The largest lot in the Plum Portfolio is 101 apartments at Beechwood Court, near the St John of God centre in Stillorgan, Co Dublin which is generating rental income of around €1.5 million a year.
Developed by Brian Cullen's Jackson Homes, Beechwood accommodates 316 apartments and a number of houses, many of which were sold to a mix of owner occupiers and buy to let investors.
Other lots that form part of Plum include: 67 apartments at Time Place, Corrig Road, Sandyford, Dublin 18; 40 units at Lad Lane, Cumberland Road, Dublin 2: 141 at Carrington Park, Northwood Park, Santry, Dublin 9: 128 at Northern Cross, Malahide Road, Dublin 13: 38 at Heywood Court, Northwood Park, Santry, Dublin 9 and 73 at Waterside, Malahide Road, Co Dublin.
The deal also reflects the strength of demand from large buyers as prior to the sale Plum's vendors, Nama, had signalled a willingness to accept bids for individual lots.
In a survey of recent investment trends, Dr John McCartney, head of research at Savills, says that bulk buying activity has been dominated up to last year by multi-family sales in which purchasers acquired blocks of 20 or more units. In further analysis of lots of more than €1 million, Dr McCartney found that more than 4,500 apartments and houses with a combined value of €918.5m were sold as multi-family investments in the three years up to the end of 2014.
The big players in the market such as Ires REIT had initially been attracted by the combination of low prices and the economies of scale as block purchases offered greater opportunities to upgrade the properties and thus secure higher rents.
However in more recent times fewer whole blocks are coming to the market, although the success of Plum may prompt more major sales. McCartney points out that "investors are increasingly having to accept fragmented ownership.
In 2012 all of the multifamily assets that traded were bought on a full-ownership basis. This figure declined to 61pc in 2013 and fell further to 53pc in 2014," he adds.
If he had added in the 1,000 units in Project Venus as well as portfolios being bought by German investors Patrizia and Deutsche Bank, the portion of block purchases may well have fallen much lower.
The willingness of these bulk buyers to bid for portfolios of dispersed dwellings may bring an interesting dynamic to the market.
They are expected to sell off some of them which may be to the advantage of home buyers as well as private investors who accounted for three quarters of the bulk purchases in the €1m to €5m. price bracket ahead of the ending of the capital gains tax incentives.
But larger buyers may also be tempted to increase their holdings in those blocks where there are opportunities to improve their cost efficiencies and increase rents.
Either way whether they hold for a few years or for a decade, their management expertise should benefit other owners especially in those blocks which have suffered because some unit owners have not being paying their management service charges.
An interesting test of the market for both small and larger bulk buyers will be in Allsop's next auction on 21 April when 265 units will be auctioned in seven lots. Should they achieve their maximum reserves they would generate €8.3m. in sales.
While two of these lots are in the Greater Dublin Area (GDA), five of them with 121 units and with combined €6.57 m in guide prices are located in Cork, Limerick and Dingle.
The most valuable of those are an almost completed development in Gortenora, Dingle, comprising 46 houses ranging in size from three bedroom terraced to five bedroom detached and with a combined guide price in the €3.25m to €3.5m range.
Twelve of the houses are built to shell and core stage. The other 34 generate €241,600 in annual rental income.
The GDA lots include Clos na Croise, Ballivor, Co. Meath, a development comprising 10 retail units, 19 apartments and 10 townhouses with a €1m guide price.
One of the blocks, containing apartments and retail units, requires completion.
In Santry, Dublin 9, five units comprising apartments 100, 101, 106, 114 and 115, Temple Court, are generating €50,400 a year and Allsop are guiding €700,000 - €750,000. Each of these two bedroom units extends to 70 sq. m.
Meanwhile news is also expected in the coming weeks on the sale of a block of nine apartments and a retail unit at 130 Pearse Street, Dublin 2. Stephen Conway of Colliers has expressed satisfaction with the response to his request for best bids before which he was quoting €2.4m.
The apartments are currently producing annual income of €130,500 while the 3,946 sq ft, vacant ground floor retail unit offers rental potential.
Among the more valuable multi-family lots which Nama is expected to bring to the market this year are about 150 units at the Grange apartment scheme, near Stillorgan which was developed by Ray Grehan's Glenkerrin Homes.