Saturday 21 April 2018

Starwood sees 13pc gain on Elm Park in three months

IRES Reit is spending €59m on apartments at Elm Park in South Dublin
IRES Reit is spending €59m on apartments at Elm Park in South Dublin
Peter Flanagan

Peter Flanagan

A US investment firm made a profit of more than 13pc after selling off close to 200 apartments in south Dublin barely three months after it took control of them.

Starwood Capital paid some €51.9m for the apartments at Elm Park in Dublin 4 in February. The US firm took over the apartments as part of a €190m purchase of the wider Elm Park complex.

On Friday, IRES Reit said it had agreed to pay €59m for the 203 apartments at Elm Park - a 13.6pc return for Starwood.

The increase in value is the latest sign that investors still see a major opportunity in the Irish rental market, with average rents now topping €1,000 per month.

Starwood took control of the apartments in the blocks known as "The Links" and "The Bay". Data from the Property Price Register shows that Starwood paid €39.9m and €12m respectively for those apartments.

In a statement on Friday, IRES said it had agreed to take control of those apartments and related car parking spaces.

The apartments are producing an annual rent of some €3.2m per annum, equating to a net initial yield of 5.4pc. IRES believe that yield could be bumped up to 5.9pc if it was to let out the remaining apartments which are currently unoccupied.

Starwood bought Elm Park out of receivership as part of a joint venture with Joe O'Reilly's Chartered Land. Chartered Land is believed to be focused on the office parts of the development, where pharmaceuticals firm Novartis and insurer Allianz are in situ. Chartered Land is also developing a new 175,000 sq ft office block on site. The Irish company is not believed to have been involved in the apartment sale.

When Starwood invested in Elm Park, the company said that "given its scope and scale, the quality of its existing assets and the prospects for significant enhancement through strategic development, we expect to create a world-class work-live environment at Elm Park".

"When repositioned over the next 12 months, Elm Park will feature modern, architecturally striking office buildings and apartments, complemented by a lush, landscaped campus with best-in-class amenities ideally located in South Dublin," it added.

Elm Park was developed by Bernard McNamara, Jerry O'Reilly and David Courtney during the Celtic Tiger years. It was financed by a €550m loan from Anglo Irish Bank. However the loans tied to the development were eventually transferred to Nama, which installed Duff & Phelps as receivers over the property.

When buying the site, IRES pointed to the location of the properties as a key selling point for the apartments.

"The outstanding quality and location of the complex, both in terms of proximity to Dublin and views of both the adjacent Elm park Golf and Sports Club and Dublin Bay make this a unique location," it said.

The deal cemented IRES's position as the dominant landlord in the Irish market at present. In little more than three years, IRES has become by far the biggest private landlord in the country. The Elm Park deal means the firm now controls 2,288 apartments here.

Chief executive David Ehrlich said the deal would "significantly to the mix and overall quality of our portfolio".

"Elmpark is really a unique complex in terms of design, quality and location and represents a rare opportunity for IRES to add to its South Dublin portfolio," he added.

Sunday Independent

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