Saturday 7 December 2019

Cuckoo funds spend €1.45bn in nine months to cash in on rental shortage

150 houses and flats swept up by US fund for €53.3m

Home sweet home?: Houses and flats at Mariavilla, Maynooth, have been sold off to US fund Urbeo
Home sweet home?: Houses and flats at Mariavilla, Maynooth, have been sold off to US fund Urbeo

Ellie Donnelly and John Mulligan

Cuckoo funds spent €1.45bn in the first nine months of the year, snapping up hundreds of apartments to capitalise on a huge shortage of rental accommodation.

A report from estate agents Cushman & Wakefield and Sherry FitzGerald also states the amount invested in the private rented sector is set to "comfortably exceed" what it said was "unprecedented" activity during 2018. The report was published as a cuckoo fund with €1bn to spend on housing yesterday snapped up 150 new homes at a development in Maynooth, Co Kildare, where builder Cairn secured fast-track planning last year.

Listed house builder Cairn Homes has sold the 150 houses and apartments in Mariavilla, Maynooth, to US fund Urbeo for €53.3m.

The build-to-rent market is becoming increasingly popular as institutional investors - dubbed cuckoo funds - radically change Ireland's traditional housing market by buying or building entire blocks of accommodation to be rented long-term.

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Cuckoo funds are seen as pushing first-time buyers out of the housing market.

The report from the estate agents said that supply remained "critically low" in the rental market, "placing continued upward pressure on rents".

The single largest deal in the private rented sector so far this year was the €285m purchase by property firm Ires Reit of 815 homes spread across 16 developments, mostly around Dublin.

Assistant Professor Orla Hegarty, a housing expert from UCD's School of Architecture, Planning and Environmental Policy, said the policy of private investors buying homes and renting them out was an international model.

"We are just at the receiving end of what is going on internationally and we have allowed it to happen here at scale," Prof Hegarty said.

She warned that if funds had enough units in an area, "they can effectively set the market, they can decide 'we want €2,500 a month'," they can leave homes vacant [if there is no demand], they don't have to drop the price because they can afford to do that."

In addition, such funds "manage from a distance", Prof Hegarty said.

"There is likely to be less discretion about as happens with many traditional landlords who knew you were not getting paid till Friday or who did the repairs promptly because they knew you were a great tenant and they didn't want you to leave," she said.

Supporters say cuckoo funds will help with the housing supply and will eventually help stabilise rents.

But critics say the funds are distorting the market and crowding out would-be home buyers, who are forced to rent or move out of the city.

In Dublin, average rents at the end of June stood at €1,713, according to the Private Residential Tenancies Board.

Richard Ball, partner at Urbeo, yesterday described the Maynooth acquisition as "another significant acquisition as we implement our strategy to deliver quality rental housing projects in well-serviced locations with good connectivity to employment centres".

Mr Ball added that Urbeo "remains ambitious to expand through further acquisitions and forward purchase agreements, and has a deep pipeline of exclusive deals with high quality partners like Cairn".

Cairn's Mariavilla project currently consists of two development areas under construction, 230 homes at Lyreen Valley, where the first phase of 80 homes has been sold to individual homeowners, and the 150 homes on the Moyglare Road, which is the area being acquired by Urbeo.

Urbeo is an affiliate of US investment giant Starwood Capital.

Last year, it formed a €1bn build-to-rent residential platform in Ireland.

In August, Cairn sold 282 apartments at The Quarter in Citywest to Urbeo for €94m.

Meanwhile, Cairn has also acquired 97 acres of development land at Clonburris Strategic Development Zone in Dublin 22, in two separate transactions from the National Asset Management Agency and O'Callaghan Properties.

Cairn spent a total of €21.5m on the two acquisitions.

It already owns an adjacent 174 acres of development land within the Clonburris development zone.

Cairn's development land there will consist of more than 5,000 new homes.

Michael Stanley, co-founder and chief executive of Cairn, said he looked forward "to partnering with public and private stakeholders to facilitate the delivery of over 5,000 competitively priced and affordable new homes with associated critical infrastructure".

Irish Independent

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