Rising rental income boosts reit’s returns

Irish Residential Properties Reit (Ires Reit) an Irish multi-unit residential property investment company, has reported a 17 per cent jump in average rents on its apartment portfolio, as it targets bank funding of up to €385m.

At the investment company's agm held in Dublin on Tuesday morning, chief executive officer David Erhlich gave a positive trading update.

The investment company reported a 10-15 per cent increase in average rental income, and has a net rental income margin for the six months ended December 31st 2014 of 81 per cent, up from 71 per cent for the initial portfolio, a figure which is “outstanding in the market place” Mr Ehrlich said.

Average rents increased from €1,070 per apartment to €1,250 in the six months to year-end 2014, largely due to its acquisitionof the Marker Residences where average rents are higher, Ires Reit said.

Ires Reit raised € 215 million in its initial public offering in April 2014, and its portfolio currently includes 1,474 apartments and more than 12,000 sq metres of related commercial space, as well as ancillary land for future development. Last week it was disclosed that Ires would aqcquire the 92 apartments and creche building from Tetrarch Capital for €19.45m. This acquisition, which is expected to close in June 2015, will bring Ires’ portfolio up to 1,566 apartments. Ires Reit’s portfolio was valued at €323.6m as of year-end 2014.

Canadian real estate investor Capreit, which is the largest apartment reit in Canada, has a 15.7 per cent interest in the fund, and remains committed, Mr Ehrlich said.

The Canadian investor granted a $150m funding pipeline facility to Ires Reit, which allowed it to acquire the Rockbrook portfolio of 270 apartments for €87.3 million in January 2015. Otherwise Ires Reit would have exceeded the 50 per cent LTV max allowed in Irish reit legislation. While this facility has now terminated, Mr Ehrlich said that it is still available, and “may be authorised at a later date” to help bridge capital raising for Ires.

In the meantime, Ires Reit is looking for bank funding. It currently has a loan to value (LTV) of 37.6 per cent, but is targeting 45-50 per cent. This means that it has the capacity to take on bank debt of between €315-385m, and Mr Ehrlich said it is currently in discussion with a number of banks, both Irish and international, on this front.

Looking ahead, Mr Ehrlich said the fund would continue to make acquisitions, with a strong pipeline coming from opportunities such as Nama disposals.

All the resolutions proposed at the agm were passed.