Property group Yew Grove sees ‘no evidence yet’ of office makeovers

Property group Yew Grove has said there is "no evidence yet" that its tenants will seek to repurpose their offices when more people return to work as Covid-19 restrictions are lifted.

The company more than trebled its profits in the first six months of 2021 when compared with the same period last year, its interim results showed on Friday.

The Dublin-listed owner of office and industrial assets outside the capital recorded a profit of €4.7 million, which was up from €1.3 million last year, including unrealised gains on investment properties of €2.1 million, as against €1.8 million last year.

The property investor, whose focus is on office and industrial assets let to State entities, IDA-supported companies and large corporates, recorded a net rental income of €5.7 million, with the contracted rent roll rising by €1.9 million.

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Speaking after the publication of the results, Yew Grove chief financial officer Charles Peach said the group was “comforted” by the fact it has “relatively low levels of vacancies” in its portfolio despite the challenges of the pandemic.

“In the past year, we have actually purchased office space and filled it,” he told The Irish Times. “So we are comforted by having relatively low levels of vacancy at the moment.

“However, people are only now starting to go back to work in the office, so I think it may be some time before we see every tenant’s intentions in terms of how many of their staff will be working in the office and their ensuing requirement for change.”

On whether the make-up of offices is likely to change after the worst of the pandemic has passed, Mr Peach said tenants “may have a view at some point” to repurpose assets in regional areas.

However, he added: “I don’t see any evidence at the moment of that occurring. That said, we are only starting to get people back to the office in any numbers. We hope that the headwinds we have had recently will fade over time.”

Net assets increase

Earlier, the company said the strong rental collections of 2020 “continued” throughout the period. “A comparison of contracted rent roll for properties owned on December 31st with June 30th shows an increase of 17.5 per cent,” it said.

“Rent received on the portfolio benefited from the letting of a vacancy at Cork Airport Business Park in January 2021 and the purchase of properties at Citywest Business Park and Dundalk.”

The net assets of the group increased by €14.1 million, a rise of 12.7 per cent over the period. The company drew on its debt facility and deployed equity raised in the period on a further €19 million of property assets.

Valuation gains on the group’s portfolio over the period were €2.1 million, inclusive of property acquisition costs of €1.7 million. The “vast majority” of the net rental income was distributed to shareholders as quarterly property income distributions, it said.

Yew Grove chief executive Jonathan Laredo said the Covid-19 pandemic and its effects "have lasted far longer and have been further reaching than most of us expected last year".

“Today, despite the vaccine rollout and its relative success in containing infection and hospitalisation rates, most Irish office-based workers are still working from home,” he said.

“However, the beginning of a return to normality has begun with the announcement in late July of quarantine-free travel for vaccinated adults and the consequent increase in airline traffic and hotel occupation.

“As we look forward to the rest of the year, it appears that the recovery in the investment market, which began in the first half of the year, will accelerate and an increase in the pipeline of investment properties may well be matched by more institutional investors prepared to buy those properties.”