Buyers' changing profile means market is much different to Tiger days

Green REIT's purchase of 13 - 17 Dawson Street last year was one a huge number of deals in 2014

Peter Flanagan

March 11 2015 04:54 PM

The market has experienced a well documented resurgence in recent years, with investors from across the world putting money into an Irish market that they previosuly paid little attention to.

Whether it has been US firms such as Blackstone and Kennedy Wilson, Asian firms such as Oxley, or big European players such as DZ Bank, investment from overseas is showing few signs of slowing down.

Some of these players, particularly the private equity funds, have been referred to by some as "vulture funds" and have been criticised for buying up Irish assets at bottom dollar prices.

Maples and Calder partner Diarmuid Mawe however disagrees, and he is well placed to comment as head of the commercial proeprty division for the law firm in Dublin.

"The arrival of the international investors to the market saw initial concerns being raised, but such concerns were short-sighted in nature," he says.

"Given the state the market found itself in post 2008, the arrival of large international investors was key to injecting confidence back in to the market and ensuring the banks could successfully progress their deleveraging programs.

"Furthermore, a significant difference in current market activity is that it is supported by a more stable equity backed model rather than the debt fuelled activity seen in the previous decade," he adds.

With the arrival of the new type of investor, it s not surprising that the structures used to do deals has changed sharply as well.

"More sophisticated and efficient structures such as REITS and QIAIFs are now used by the larger investors and this differs substantially from what the market had seen previously," says Mr Mawe.

"In a competitive bidding process having right structure will give an investor a significant advantage over other bidders who may not have sufficient size or resources to avail of these preferred investment vehicles," he adds.

Unlike previous cycles, the current deal activity has been boosted enormously by the loan portfolios being sold by Nama and the banks.

Nollaig Murphy, who heads Maples and Calder's finance team, believes the change that has brought, and the advent of direct lending in the sector, has had a huge effect.

"We have seen a rise in the popularity and success of direct lending into the property sector in Ireland in 2014.

"While direct lending by managers and credit funds had gained significant traction in the US and EMEA over the past decade, it has only really become active in Ireland in recent years. It has been a valuable and significant addition to the lending sector in this regard.

"It is also being seen as complementary to, rather than competitive with, the pillar Irish banks as lenders, with evidence of portfolios and individual loans actually being pitched to direct lenders by those banks seeking to re-configure their own loan books to core activities.

"A notable element of the rise in direct lending in Ireland has been governmental support of the activity.

"Many European countries historically put in place statutory schemes to support SME and other sectoral lending (such as the UK, France and Germany), Ireland had no analogous lending schemes.

"Now, while it has adopted a less formalistic approach by providing financial backing to initiatives being established by third parties, the additional credit generated has been extremely welcome," Mr Murphy notes.

ing on the commercial property market will be among the topics up for discussion at the Commercial Real Estate Summit next Thursday at the O'Reilly Hall in UCD.

For full details contact eunan@coreconsulting.ie