Tuesday 23 July 2019

Housing fund to raise €300-400m to increase investments

Stock photo: PA
Stock photo: PA
Ellie Donnelly

Ellie Donnelly

Urbeo Residential, a new mixed-tenure Irish housing fund, is planning to raise between €300-400m to scale up its investments in the Irish private rental sector (PRS).

The fund will focus on providing housing to low and middle-income households, principally in Dublin, but also other Irish cities.

Already the fund has fully let its initial pilot scheme in Tallaght, County Dublin, which consisted of a 131-unit New Bancroft development that was acquired in July 2017 for €33m.

The pilot scheme was backed by, among others, the Ireland Strategic Investment Fund (ISIF).

The ISIF is an €8bn Government owned fund that invests with a long term time horizon on a commercial basis.

Subject to certain conditions being met, it has been proposed that ISIF will be an anchor investor in the planned scaling up of the fund, with capacity to commit up to €100m on a co-investment basis.

Urbeo has also recently agreed a Strategic Relationship Agreement (SRA) with Glenveagh Living – part of Glenveagh Properties. Under the agreement, both companies have committed to collaborate on the sourcing, acquisition and development of residential communities, with Urbeo acting as a potential acquirer of Glenveagh built developments.

"We believe there is a clear gap in the market to provide a quality rental housing option to low and middle-income households," Felix McKenna, a former senior asset manager at Ireland’s National Asset Management Agency, and now CEO of Urbeo Residential, said.

"Our aim is to create balanced and sustainable communities where the long-term stable tenant base is aligned with the requirements of investors for steady, secure income."

Urbeo’s model is focused on matching investor needs for long-term stable returns with those of tenants, to build stable and sustainable communities of rental housing, including social and affordable housing, the company said.

While not acting as a developer itself, the company will seek to partner with builders, developers, and housing associations to deliver new rental housing projects in, what it referred to as "non-prime but well-serviced locations."

"We are providing the first opportunity to invest in scale in European-style rental developments in Ireland, the type of which are long overdue in a market that has seen extremely rapid increases in residential rents in recent years," Mr McKenna said.

It is targeting a stabilised dividend yield of 4.5–5pc and levered IRR of 8–10pc.

"As Ireland nears full employment and the economy continues to grow vigorously, housing is one of the strategic risks to continued recovery identified by government and industry figures," the company said.

Urbeo has appointed Deutsche Bank and Goodbody Stockbrokers to advise on the fund raising, targeting institutional investors seeking long-term stable returns, it said.

Initial investors, and Urbeo Residential co-founders, include Bill Nowlan and Frank Kenny who were behind the establishment of Hibernia REIT in 2013, a Dublin office focused REIT with a portfolio valued at over €1.2bn.

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