Foreign firms eye up capital as London property falls behind
Published 04/05/2014 | 02:30
IN the latest sign of a wave of international investors zeroing in on Irish property assets, a London player has confirmed it is on the lookout for assets in and around Dublin.
Quadrant Estates, which up to now has been focused almost exclusively on the central London market, bought the Cineworld cinema complex on Dublin's Parnell Street last month. Now its managing director has made clear to the Irish Independent that his firm is looking for more deals on this side of the Irish Sea.
"We will be keeping a close eye on retail and central Dublin," said Christopher Daniel. "We have not identified any specific properties, but we are aware of opportunities that may be coming up and we will look at those.
"Cineworld is our first deal in Dublin and we have already learned a lot from it."
Quadrant specialises in the commercial market – it does not do any deals involving the residential sector unless it is "adjunct" to a commercial property. Its business model reflects the growing tendency of businesses to partner with private equity firms. Quadrant identifies potential properties and then approaches a PE firm to partner on the deal.
The structure of the Cineworld purchase was no exception. Quadrant bought it with Orion Capital Managers – a European investment firm. In this case, Quadrant will manage the Parnell Street property day-to-day.
"We were attracted to that deal because we know the tenant from London and we knew the property was a good performer in the top 10 cinemas across the UK and Ireland. The underlying asset is also really sound, and with a yield of about 8pc it was very attractive to us.
"The fundamentals are also very good for the property. It is the right location in Dublin, so there will always be alternative uses for a location like that if need be."
The Cineworld purchase may have been Quadrant's first deal in Ireland, but it is not their first brush with the Irish property scene. Quadrant along with Orion made a push last year for the 80 Fenchurch Street development in the City of London.
That deal would have seen Quadrant take over a near derelict property in central London that has been earmarked for a massive redevelopment said to be worth around €200m.
The sale ultimately fell through however, and NAMA have since taken control of the site from the Irish company Shieldpoint.
Now, with the site in receivership, Mr Daniel said his firm may take another look at the deal.
"We went under offer on the property last year, but we pulled out for a number of reasons. It was not just about price," he said.
"We were very close to buying that, and were surprised it went into receivership.
"The fact remains though that there are a significant number of issues to resolve with the site and the development plans, and is not an easy one to deal with."
The interest from Quadrant in London – and move into Dublin – raises the question of the sustainability of the London property market.
While prices have rocketed in the past five years as overseas investors park money in London property, some of the native firms have started to cash in, and de-risk, their portfolios.
The two biggest real estate investment trusts – Land Securities and British Land – were net sellers of assets in the first quarter of this year for the first time since 2010.
Perhaps even more significantly, Grosvenor, which controls most of the Mayfair and Belgravia districts of central London, said last week the super prime residential market there was overvalued.
It added it was selling property in those areas and instead investing in cheaper rentals outside the neighbourhoods.
Mr Daniel accepted that the London market was beginning to slow but added that little should be read into the move to Dublin.
"It's nothing as cerebral as that," he said. "Clearly the state of the London market is a matter for huge debate.
"We know the London market really well, but I suppose some people won't be far from calling the top over there.
"There is still the ability to make money in London, but the free ride of making money has gone.
"If you bought three years ago, you probably could have done nothing with the building and flipped it for a big profit.
"Now though you need to be adding and creating value."
Quadrant is the latest overseas investor to focus on Ireland, but they are one of the few to have looked at the market from east of the country.
To date, most of the big investment has come from American firms such as Blackstone, Kennedy Wilson and Lone Star, but there have been few moves of any significance from the UK, continental Europe and Asia.
That now appears to be changing, however. Chinese developer Xu Weiping is looking closely at sites for development, while a number of UK firms are now carrying out due diligence on the Dublin market in particular.
Russia's richest woman Elena Baturina took control of the Morrison Hotel in 2013 for a reported €22million.
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