Sunday 24 September 2017

Over 90pc of deals done in cash as market surges

Jurys Inn Hotel in Limerick is the latest major commercial property to be offered for sale this year as investors pile into the commercial sector
Jurys Inn Hotel in Limerick is the latest major commercial property to be offered for sale this year as investors pile into the commercial sector

Peter Flanagan Commercial Property Editor

MORE than 90pc of all commercial property deals completed in the first half of the year were all cash affairs, as buyers look to speed up sales.

New research from Savills shows that 92pc of all commercial property transactions were cash only between January and June this year.

While the majority of deals in the commercial property space tend to be cash heavy, the market is now seeing even more emphasis on cash, as investors are no longer willing to load up on debt to take on a property.

Savill's director of research John McCartney said that investment funds have become much more active in the market this year.

"New funds that were never previously active in Ireland have come in as buyers. As a result, cash sales have increased.

"With the new REITs now coming onstream I would expect this trend to continue," he added.

"Having said that, private equity firms are now, in general, preferring to close their deals with cash whenever possible.

"The reason they are adopting this approach, is that it is faster, and less cumbersome with fewer administrative costs involved among other factors," he concluded.

Just over 50pc of deals are "all cash" post closing.

Savills is forecasting commercial property deals in Ireland will top €1.5bn this year, with about 90 purchases expected to go through by year's end.

Launch

If those figures pan out, they will be well ahead of 2012, when barely €500m was spent buying commercial property in the country.

The success of the launch of the Green Real Estate Investment Trust – it is currently valued at about €380m even though its only assets are €310m in cash – has been seen as further evidence of the renaissance in the property sector. Other REITs are expected to launch in Ireland as soon as before the end of the year.

On Tuesday, NAMA chairman Frank Daly said the State bad bank was preparing to bring two more property portfolios to market at a value of up to €400m. That has spurred huge interest in the sector as more "high quality" commercial property comes to market.

The hotel chain Jurys Inn will be hoping to tap into that surging market as it seeks €5m for the Jurys Inn Hotel in Limerick, which it is selling as a going concern.

Jurys has retained CBRE to secure a buyer, with a deal likely to be secured by private treaty.

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