Institutional capital of €7bn chasing build-to-rent assets

Some €7 billion of institutional capital is chasing build-to- rent assets in the Republic, a new report claims.

In a note to investors, Investec suggests the State's biggest private landlord, Irish Residential Properties Real Estate Investment Trust (Ires Reit), is in a good position to benefit from the continued need for rental properties.

“The Dublin rental market remains characterised by a chronic lack of accommodation, which is putting increased pressure on rents and keeping occupancy elevated. Private rental sector [PRS] yields are trending lower, which helps to support our forecast of ongoing net asset value [NAV] expansion,” Investec chief economist Philip O’Sullivan said.

He said he had been told by at least one agent that there is €7 billion in capital chasing build-to-rent assets.

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Recent data from property website Daft.ie showed there were just 1,358 units available to rent across Dublin in February, due in part to a decline in the number of “accidental landlords”.

Mr O'Sullivan said Ires Reit, which is due to add 955 units to its current stock, has a "strong balance sheet" to support the growth of its portfolio.

Investec predicts Ires’s spend on capital expenditure and acquisitions will total €317 million between 2019 and 2021.

Ires was one of three reits to float on the Irish Stock Exchange between 2013 and 2014, and had 2,679 residential units on its books at the end of last year, with the value of its portfolio jumping by 22.7 per cent in 2018 to €921.3 million.

The group last month reported a sharp rise in profits for 2018 as the average rent achieved per unit increased by 5.4 per cent to €1,599. Revenue from investment properties it owns increased from €44.7 million to €50.6 million during the year as profits jumped from €65.1 million to €119.8 million.

“Between forecast NAV accretion and dividends, we think that investors in Ires could reasonably expect to enjoy high single-digit average annual total returns over the coming years, absent of any major financial shocks,” Mr O’Sullivan said.