Friday 23 August 2019

Activate lending breaks €300m as housebuilding booms

Activate chief executive Robert Gallagher
Activate chief executive Robert Gallagher

Gretchen Friemann

Activate, the private equity and State-backed specialist financier, has ramped up its lending volumes to residential property developers over the past year as housing construction sputters back to life.

Latest accounts for the non-bank lender, which commenced operations at the beginning of 2016 after securing funds from the nation's sovereign wealth fund, ISIF, and the global buy-out giant KKR, show total commitments to borrowers stood at €86.3m at the end of December.

By September, when management signed off on the figures, the volume of total commitments had ballooned to €277.3m.

Sources close to the firm said that number is now above €300m, setting Activate on a path of aggressive expansion over the next few years as it pitches to become as pivotal a player in the sector as the main banks. So far the firm has lent money to 23 different property developers with the combined capacity to build about 3,700 homes.

The accounts do not reveal the terms of its financing but it is understood Activate advances funds at 80pc loan to value - far higher than the levels at which the banks are prepared to lend.

It also takes a chance on a project's planning status, committing funds to sites that have been zoned for residential development but which lack a green light from authorities for the construction phase.

In its near two years of operations, Activate has dispersed cash to some of the nation's best-known builders, including Joe O'Reilly and more recently, the listed housebuilder, Cairn Homes.

The taxpayer-backed venture funnelled €50m to Cairn to fund its high-profile acquisition of a site from broadcaster RTÉ.

The 8.64 acre site at RTÉ's Montrose campus is expected to house 500 luxury apartments.

Activate's accounts illustrate the sharp pace of its expansion and reflect a surge in activity in a once-dormant market.

According to the recently filed financial documents, Activate relies on a €325m senior revolving credit facility from ISIF and a €175m junior revolving credit facility from KKR.

The loans are secured against development sites.

Irish Independent

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