Tuesday 23 April 2019

Green Reit shares up as Vernon and Gunne pull trigger

One Molesworth Street is part of the Green Reit portfolio
One Molesworth Street is part of the Green Reit portfolio
George’s Quay Plaza
Ellie Donnelly

Ellie Donnelly

Shares in Green Reit shot up more than 8pc yesterday after the property firm dramatically put itself up for sale.

The persistent discount between Green Reit's share price and the value of its portfolio of largely high end commercial property assets - mainly in Dublin - was "at the core" of the decision to sell, Green's bosses said.

A sale could be of the entire stock market structure or of the portfolio of assets - including prime offices let to the likes of the Revenue Commissioners, Barclays Bank and Vodafone, a developing logistics park near Dublin Airport and development sites beside the Central Park office park in south Dublin.

Key assets include Central Park office campus in Leopardstown, Fitzwilliam Hall in Dublin 2, and One Albert Quay in Cork city.

Earlier this year the group reported a 2pc rise in rental income to €34.4m for the six months to December 31, 2018.

Property veterans Stephen Vernon and Pat Gunne were among those in the industry who came through the last crash in good stead - having sold assets before the bubble burst.

They then launched Green Reit in 2013, tapping the market for cash in order to buy assets at knock-down prices and using the then newly introduced real estate investment trust (reit) legislation to set up the first listed property company of its type in Ireland.

The initial €310m raised from investors has evolved into a €1.4bn business. However, Green Reit is currently trading at a price that is 18pc less than the value of its assets.

Yesterday, Stephen Vernon and Pat Gunne said they would not be looking to acquire the business for themselves - prompting some speculation that the property veterans were calling the top of the market.

However, Green Reit chairman Gary Kennedy said the assets remain compelling.

"Green Reit owns one of the rare prime office and logistics portfolios of scale in Ireland, underpinned by strong tenants and a supportive market and macro environment.

"Notwithstanding this, the company's share price has been subject to a material and persistent structural discount to its net asset value per share for over three years now… It is the board's view that this [sale] is demonstrably in the best interests of our shareholders," he added.

Green Reit was the first Irish reit, a special type of company that benefits from reduced taxation - including not having to pay corporation tax on rental profits or the standard capital gains on asset sales, as long as it meet criteria including only investing in property and distributing the vast bulk of income as dividends each year.

In theory, reit structures push the tax bill from the listed entity onto its investors, including capital gains when it is sold.

The group currently earns €75.5m in rent each year, and expects that to increase to €83m within 18 to 24 months. Colm Lauder, analyst at Goodbody Stockbrokers, said there was still "significant" development opportunity within the portfolio, including "a particularly attractive" 310-acre logistics park beside Dublin Airport.

"The Dublin office market has continued to see strong levels of interest from global investors with demand particularly strong for long-income streams," Mr Lauder said.

He added that Goodbody expect "strong demand" for the "unique" Green Reit portfolio offering.

Read more:

Donal O'Donovan: 'It got in on the bottom so Green Reit doesn't have to call the top to get out ahead of the market'

Irish Independent

Also in Business