Ires Reit has big plans for Dublin
The chief executive of Ireland's biggest private landlord, Ires Reit, has said his company's efforts to secure land for development in Dublin and its suburbs is being frustrated by private equity and private owners who are hoarding land in the expectation that it will increase in value.
Speaking to the Sunday Independent following Ires Reit's AGM last Tuesday, David Ehrlich said in a number of cases the land Ires Reit had looked to acquire in the capital and in and around the M50 motorway was "just being locked up".
Asked who was holding on to the land, the Ires chief said: "I just know that when we approach people with our townhouse concepts, a number of them are just sitting on it. Private equity and private owners. It's tough. People believe that in three, five or 10 years, that given the demand, there's going to be an increase in the price in housing."
While that comment supports the statement made by Nama chief executive Brendan McDonagh last Thursday, in which he said there was evidence that speculators were holding on to sites without building on them, Ehrlich's reference to 'private equity' suggests that at least some of the parties now involved in hoarding land acquired it from Nama. Quite apart from the issue of owners "sitting on land", the Ires Reit boss said many of the sites his company had looked at in Dublin's suburbs particularly remained unserviced, which made it unviable for development currently.
Referring to this, he said: "The Government announced a structured plan but it is not going to service a tremendous amount of land.
"I think a lot of those owners who've owned that property for a long time are figuring in five years' time the price of it is going to go up."
Notwithstanding the difficulty in securing more residential development land in Dublin and greater Dublin area, Ehrlich said Ires was still actively searching for sites with a view to building townhouses.
Asked to identify the locations his company is interested in, he said: "The closer to the city, the better, but there's not that much land that's serviced and ready to go.
"We look at 'does the area have its own employment, is it close to the airport or some other major employer? Does it have the schools to accommodate a major development?
"Is it close to a rail line of some sort so you could be in the city in under an hour?' Those are the sort of criteria we're looking at. You're likely outside the M50, but hopefully not by too much. This is one of the results of not having the right densities. You get this kind of sprawl."
Ehrlich confirmed that Ires Reit has extended its search beyond Dublin.
On this, he said: "We have looked at Cork. If we could get 400 or so apartments there, we would look at that, provided that the spread over the book in terms of the return we could get in Dublin weren't going to Cork because we don't see it as a stable and long-term market like Dublin."
Notwithstanding that reservation, he added: "They're going through a lot of growth right now and we're looking at it carefully, so if we could get the right spread to recognise that, we'll continue to look at Cork."
Ires Reit is currently appealing the decision of planners at Dun Laoghaire Rathdown County Council to reject its application for the development of 467 apartments at Rockbrook in Sandyford to An Bord Pleanala.
Giving his reaction to the council's refusal of the plan, Ehrlich said: "I think there's sometimes, with some county councils, a particular disconnect between what central government and the country wants and needs, and their own local kinds of issues. It would be good to see when the [Housing] Minister or the Government makes an announcement on heights or densities, that there's a way of getting the local councils to adapt to that."
Asked if he was frustrated by the planning process here in Ireland, Ehrlich compared it to the model followed in Toronto, the home of Ires Reit's principal backer, Capreit.
He said: "In Toronto, the planning process can be difficult and time-consuming but along the way, there's lots of opportunity to go back and forth and to have give and take, whereas here you have your pre-planning consultations, but that's before you've really put anything forward. Once you put something forward, they can request further information but it's not like you can sit down and work something out. I think that's the biggest frustration for us.
"The [Irish] process would be better I think if you had that interaction so people could work together cooperatively towards the same end."
Commenting on the position occupied by Ires Reit in the Irish residential rental market, Ehrlich rejected the suggestion that it is stretching tenants in terms of the rents it charges, or that it is part of the wider problem of spiralling rental costs.
"The reality is we don't set the market. We're a very small fraction of the market. The reality is if you're going to attract the capital, they expect a certain kind of return on that for taking the development risk and the leasing risk and so forth. We've turned our attention towards more supply and that's what we're about."
He added: "I understand the political pressures but I think if you have a willing tenant and a willing landlord, they would come to terms that would be sufficient.
"Rents are high and there was a lot of political pressure, but the 4pc regime that's been brought in, most of our investors think its reasonable."
With CBRE estimating that some €27bn in capital is now targeting the build-to-rent sector in the UK, Ehrlich said it was his understanding that "a number of institutions" were now looking to forward fund development here.
"Definitely, the world has opened up to the excellent opportunity that exists in Dublin," he said.