Thursday 29 September 2016

Top landlord says supply issues, not cash, will slow deals

Published 17/05/2016 | 02:30

IRES Reit is buying 203 apartments at the Elm Park development in South Dublin from US private equity firm Starwood
IRES Reit is buying 203 apartments at the Elm Park development in South Dublin from US private equity firm Starwood

The nation's biggest private landlord is set to continue buying up apartments here, as the rental market continues to surge with no end in sight.

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IRES Reit chief executive David Ehrlich told the firm's annual general meeting yesterday that it has close to €150m in firepower to acquire more properties.

"We'd expect to deploy that capital this year but that depends on how quickly supply becomes available," he said.

But Mr Ehrlich emphasised that with interest rates set to remain at historic lows for some time to come, there remains the possibility of raising more funds if the need is clear.

The company, which is backed by Canada's CapReit, has a current gearing ratio of 23pc, but that can be increased to as much as 50pc.

IRES has built up a portfolio of 2,087 properties - mostly apartments - around Dublin in less than three years. It has done that by taking on large property portfolios from Nama and the banks. Up to now Nama has been happy to offload its portfolio quickly but Mr Ehrlich said that has begun to change.

"Nama has become much more active in terms of finishing out some of its apartments and has also been doing a lot in terms of retrofitting for fire safety and that kind of thing, so that has slowed down the pipeline somewhat."

Still, the company said it sees a steady pipeline of properties coming to the market from the state bad bank as well as other lenders. More recently, IRES has been buying assets from private equity firms which entered the Irish market during the crash. It is buying 203 apartments at the Elm Park development in South Dublin from US private equity firm Starwood.

IRES has focused on buying property outright up to now but it is building apartments as well.

This is where the company's strategy of buying partially completed sites for knock-down prices promises huge dividends.

The company has started building the first 68 of as many as 650 apartments at Block 2B at the Beacon South Quarter in Dublin. Crucially, the infrastructure for these apartments, such as access roads and especially underground car parks, are already in place.

This means IRES will be able to build these apartments for peanuts in industry terms.

Digging an underground car park can cost as much as €40,000 per space. That alone will put IRES straight into profit on these units.

The AGM was notable for the number of overseas investors and analysts present. The company was bringing those players on a tour of its properties after the meeting. That is a routine part of showing investors what they are paying for, and it is also a routine part of showing investors what they may be asked to pay for in a future fundraising.

Numerous firms have invested in Ireland since the crash, some more welcome than others.

Mr Ehrlich is keen to separate his company from short term buyers here.

"We aren't a vulture fund. We are here for the long haul. We do not want peaks and troughs, we want sustainability," he said.

IRES shares rose 0.6pc to €1.13.

Irish Independent

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