Bottom of market hit as Green in €200m float
Vernon and Gunne to raise money for commercial property deals
Two of Ireland's smartest property investors Stephen Vernon and Pat Gunne have called an end to the near seven-year property market crash.
The pair are seeking to raise over €200m from investors in a special Green Property stock market float next month. This money will be used to buy up prime commercial property in central Dublin and will mark the first company to seek a full primary listing on Ireland's stock market since 2007.
"For the types of assets we're investing in we don't think that the prices will be going down. That's why we're doing this," Vernon told the Sunday Independent. Green is also to invest €10m of its own funds into the firm.
While big US funds such as Blackstone have been truffling around the Irish market seeking deals, this marks the first time a major institutional-backed Irish investor has entered the domestic market. The Comer Brothers, Larry Goodman, John and Bernie Gallagher and some ballsy private buyers have made a number of acquisitions recently.
"In September 2012, the mood music changed. There was clearly a different atmosphere," Vernon said. "There have been the first glimmers of light in certain sectors." Commercial property indicators suggests that some prime city centre offices have risen by 10 per cent since January, with vacancy levels in parts of Dublin 2 and Dublin 4 falling to just 6 per cent as multinational firms such as Google and Facebook expand.
Davy Stockbrokers and JP Morgan Cazenove are advising the company, which will be structured as a real estate investment trust (Reit) to take advantage of changes in legislation. Reits are listed firms that own or operate commercial buildings or properties. These vehicles offer property investors major tax advantages as they are generally exempt from corporate tax.
Vernon and Gunne have set off on an investor roadshow focussing on North America, UK and Europe. It is likely that pension funds, sovereign wealth and other longer term investors will be approached. The Green vehicle will be pitched as a punt on the Irish economic recovery as well as a pure property play. Vernon turned his Green Property company from a €24m stock market minnow into a €1.85bn valued property and shopping centre owner before taking it private in 2002. Gunne sold his family property business to CBRE during the boom before teaming up with Vernon at Green in 2010.
Once it has completed its initial €200m-plus fundraiser from investors, Vernon and Gunne plan to leverage the vehicle up with bank debt to finance an acquisition spree.
Although regulations allow for the Green vehicle to borrow up to 50 per cent LTV, management are likely to take a more cautious view, capping borrowings at 35 per cent. It is understood that Irish as well as international banks may provide financing for these property deals. This marks a dramatic change in sentiment towards Irish property by the domestic banks.
While the focus of the company will be to acquire office blocks in Dublin 2 and 4, it may also look at developing greenfield projects or completing half-built schemes in prime locations. Current rules mean that Green must invest 75 per cent of its money in "good assets" such as office blocks and buildings. The remaining 25 per cent could be invested in other assets such as property-backed bank loan portfolios. The company is thought to have identified a number of potential acquisitions.