OVERSEAS INVESTMENTSWith the dollar low against the euro more Irish companies are looking at acquiring well located property assets in the US, writes Jack Fagan
AN IRISH REAL estate development company based in Boston has bought a 340-berth marina in Cape Cod for $14 million (€8.907 million).
Dublin-based Ailesbury Investments will be partners in the project after investing $5 million (€3.181 million).
Orbis Property Advisers - run by Irish-born financiers Fergal Woods, Michael Mulcahy and James Walsh - plan to use a unique legal structure to accelerate future cash flows without breaking up the marina. If the strategy works, they hope to make a substantial profit before walking away from the investment within two and a half years.
The Base River Marina at West Dennis is heavily used, like other marinas in Cape Cod, because of a surge in yacht sales. More boats create demand for more places to park them. But waterfront is in short supply.
"No matter what happens in the economy here," says Woods, "there will always be plenty of wealthy people who need to park their $500,000 boats."
For a start, Orbis is to sell 80 of the 160 wet slips on 99-year leases at between $100,000 (€63,600) and $120,000 (€76,000) each. These sales are expected to yield around $9 million (€5.725 million).
To comply with State guidelines on water accessibility, the balance of the wet slips will be offered for lease on a yearly basis at a rent which is likely to be around $5,500 (€3,500) per boat. The sale of 180 dry racks is due to bring in another $4.2 million (€2.672 million).
Other assets to be sold include a bar and restaurant, a boathouse and commercial building and, if the sell-off goes according to plan, it should bring in close to $23 million (€14.63 million) in all. At that valuation, Orbis would expect to show an investment return of about 35 per cent.
Woods says that in addition to the huge profit potential in the project, the down side risk was reduced because it was a premium property in a premium location.
Woods says that despite the slowdown in the economy and the credit crunch there was a lot of capital, not just Irish but Wall Street, chasing property deals in the Boston area.
"A lot of the time these property funds are run by well educated people who know nothing about real estate and are spending other people's money. Like stock mutual fund managers, they can sometimes act like sheep and, for example, buy office or retail when it is popular and sell it when it goes out of fashion - precisely the opposite of what a seasoned real estate investor would do."
Orbis, which finances real estate deals through a sister company FinanceBoston, is about to build 200 apartments on a joint venture basis with a developer next to a railway station in Framingham, about 10 miles west of downtown Boston. The mainly two-bedroom homes are expected to rent at $1,400 (€890) to $1,600 €1,020) per month.
Woods says that developers in Boston, like many other parts of the US, are presently "hurting" and they needed to sell completed units or they needed a partner.
"We have come in to take 60 per cent of this project. There is not a great sentiment in Ireland at the moment towards the US but, if something compelling like this apartment block becomes available, then Irish clients will want to invest. The minimum investment is likely to be around $250,000."
He says that in the recent boom conditions rental stock became quite depleted as most units were sold. Anyone wanting to buy now would need to have a 10 per cent down payment and even then a lot of people could not get a mortgage. This situation had now created a huge demand for rental properties.
