Multi-family sales outstrip individual property deals
Demand for portfolios of apartments and multi-family blocks appears to be stronger than demand among home owners and small investors for apartments.
That's one way of reading recent decisions by two vendors to opt for the multi unit route rather than selling units individually.
The latest of these was NAMA's decision to sell 13 apartments in one lot at the up market Shrewsbury Square development on Sandymount Avenue, Ballsbridge, Dublin 4 where TV personality Gay Byrne was among the purchasers before the crash. Agent Hooke & MacDonald is guiding €9.5m for the lot which comprises 11 two-beds and two one-beds. The estimated annual rent roll is €440,000 suggesting a return of 4.7pc gross.
UK developer U+I also opted for a multi-unit sale with 27 homes at Robswall in Malahide which is understood to be close to a sale. Six of these units had been for auction individually through Allsop last year but U+I later included them in the larger portfolio which has a €6.5m asking price.
Twenty of these units are let and producing combined rents of €330,000 per annum. If fully let the overall current estimated rent roll could be about €490,000 per annum suggesting a gross yield of close to 7.5pc.
Demand may not be the sole factor affecting choice of sales strategy.
Multi unit sales can be faster to close than if the units were sold piecemeal. A whole portfolio can sell within a few months but individual sales from a large portfolio may take a year or even longer.
Nevertheless the latest reflection of multi unit demand is the emerging interest in forward purchasing, according to Ross Harris of Sherry FitzGerald.
"A number of larger buyers who require large scale portfolios in order to maximise their cost efficiency are looking at forward purchasing as one way to address the shortage of supply," he explains.
Robert Hoban of Allsop says that vendors can also achieve premiums of between 5pc to 15pc for self-contained blocks where they don't have to pay the service charges which are required with dispersed portfolios.
More than €107m of sales have either completed or gone sale agreed in the current quarter of the year according to figures compiled by the Irish Independent.
That could be compared with the €92.7m worth of multi-units which Sherry FitzGerald says were completed during the first quarter of 2015.
The current demand is all the more re-assuring considering recent concerns that Minister Alan Kelly's tenant protection measures might dampen investment demand.
The largest deal so far this year was IRES Reit's acquisition of 442 apartments in Tallaght Cross West from Nama for €83m in a deal brokered by DTZ Sherry FitzGerald. IRES said the apartments produce annualised passing residential rents of €5.3m at 88pc occupancy, generating a gross yield of 7.4pc. It expects to increase the yield to 8.5pc by attracting tenants to the vacant 53 units.
Also gone sale agreed is a portfolio of 50 apartments at Abberley Square, Tallaght, Dublin 24. Knight Frank had been asking €6m or an average of €120,000 for each unit. It has the potential for a €720,000 rent roll which, at the guide price, suggests an 11pc gross yield.
Abberley recorded a slightly lower yield in February 2015 when a group of eight apartments sold for €950,000 at an Allsop auction or an average of €118,750 each. Ranging in size from one to three bedrooms, seven of the eight units generated a rent roll of €86,700. If the vacant three bed had been let, this could have brought the yield to 10.5pc.
In February this year IRES also agreed to acquire 23 apartments, and a 57 sq m office suite at City Square, Gloucester Street, off Pearse St, Dublin 2, for €5.9m. It has annualised passing rents of €500,000 at 96pc residential occupancy and full commercial occupancy, generating a gross yield of 8.5pc. The apartments comprise 15 one-bed and eight two bed units. The deal brings IRES portfolio over 2,100 apartments which is still below its target of 3,000 plus.
Other sales in the current quarter include a number at recent Allsop auctions. The most valuable was a group of seven vacant town houses at 1-6 and 8 Spire View, Phibsborough Avenue, Dublin 7 which sold for €1.76m or €251,430 each.
Nearer to Dublin City University, six apartments, at 23,24,59,86, 92 and 94 College View, Ballymun, sold for €595,000 or €99,167 each. Fully let and generating €58,800 a year, the sale price for the two bedroom units reflects a gross yield of 9.88pc.
A group of 24 apartments, at Shannon Weir, Deerpark Road, Athlone, Co. Westmeath, sold for €1.35m or €56,250 each. Ranging in type from one bedroom to three bedroom duplexes, all but one are occupied and generating a combined rent roll of €152,340. The sale price reflects a gross yield of almost 11.3pc.
However another Athlone lot, at Pearse Court, O'Connell Street, failed to sell despite a possible yield of 14pc at its €625,000 guide price.
Ken MacDonald of Hooke and MacDonald says that demand is especially strong from private investors for multi-unit lots of less than €10m. Lots on the €10m to €230m range are attractive to investor syndicates and partnership as well as to some private and institutional investors while the lots over the €30m appeal mainly to institutional investors and funds.
A gauge of yield trends may be seen when the Property Price Register records the sale of 10 apartments at Kelly's Court, Kelly's Row, off Dorset Street Lower, Dublin 1. DNG are currently asking €1.5m, the equivalent to an average of €150,000 for each unit. They consist of five one-bedroom, and five two-bedroom units currently producing €126,000 a year suggesting a yield of 8.4pc.
Last September Allsop sold 10 other apartments in Kelly Court after auction for around €1m. They comprised four one-beds and six two-beds generating a €119,400 rent roll and suggesting a gross yield of about 11.9pc.