Council pays up to €3,000 a month to rent plush flats off cuckoo fund
A Dublin council has signed an unprecedented 25-year lease on a €55m luxury apartment block for social housing now owned by a cuckoo fund.
Dún Laoghaire-Rathdown County Council is expected to pay €2,000 to €3,000 a month to lease each of the 87 new apartments at Herbert Hill, Dundrum, from German property fund Real IS.
The builder Glenveagh confirmed the sale last night of Herbert Hill for a total price exceeding €632,000 per unit.
The council announced it would become the sole lessor for what Glenveagh describes as "a flagship for future high-end residential development in south Dublin".
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Councillor Shay Brennan said he was "delighted".
He said the apartments "can now be made available to households on the housing list and existing council tenants who are in need of a transfer or who wish to downsize to smaller accommodation better suited to their needs".
The "social housing progress" page of the council website says 4,524 people were on its waiting list.
The council declined to say how much it intends to charge Herbert Hill tenants or to pay the German owners in monthly rent. Calls and emails to the council's press office last night were not returned.
Block sales to so-called "cuckoo funds" are controversial because they reduce options for first-time buyers, who struggle to compete with institutional investors and social housing providers.
Herbert Hill is a mix of one, two and three-bedroom units across the road from Dundrum Town Centre.
While the developer and the council did not identify the buyer, an industry source identified it as Real IS, a Munich-based property investment firm with assets exceeding €7bn in 11 countries.
The council had signalled its interest in securing Herbert Hill for use as social housing despite its luxury profile.
As part of a Davy Corporate Finance document circulated in June on behalf of the council, potential investors were told a 25-year lease would provide guaranteed income.
It identified the investors' likely gross income at €2.1m annually, less than open market rates but without the risk of lost rental income during a downturn.
This figure was based on the council paying monthly rents of approximately €2,000 for one-bed units, €2,500 for two beds and €3,000 for three beds.
The Glenveagh brochure says Herbert Hill is composed of three houses - including a gate lodge - and 17 one-bed units, 62 two-bed and five three-bed. Many have balconies overlooking Dundrum Town Centre. The smallest unit is 596 square feet, the largest 2,800 square feet.
Shares in Glenveagh rose more than 3pc to €0.81 in late trading on the news.
Yesterday's sale is the latest in a swathe of purchases this year by international property funds exceeding €1.3bn, mainly in Dublin.