US firm to set up €500m property deal fund in Dublin

US investment firm Quadrant Real Estate Advisors is planning to raise as much as €500 million for a Dublin-based fund aimed at financing Irish and UK commercial property deals as banks largely eschew the market following the crash.

The establishment of the fund, which will target investors including pension funds in Ireland and overseas, is still subject to Central Bank of Ireland authorisation.

Quadrant is lining up Gerry Keenan, chief executive of Irish Life Investment Managers between 2005 and 2013 and current chairman of stockbrokers Merrion Capital, and Alan Broxon, former director of the Irish Pensions Trust, as directors of the fund.

‘Logical step’

Kurt Wright

, chief executive officer at Atlanta-based Quadrant, told The Irish Times that setting up an Irish fund “was the most logical step” after the firm backed a number of deals in Ireland in the past two years.

The fund would be interested in financing office, hotels and apartment deals, offering finance of up to 75 per cent of total costs at typical rates between 7.5 per cent and 9 per cent, he said.

Last year, Quadrant entered a deal with the Irish Strategic Investment Fund, committing up to €100 million to finance office development and other construction projects in Ireland.

It also part funded the €29 million purchase of Clerys department store in Dublin last summer by Irish investment group D2 Private, led by Deirdre Foley, and Cheyne Capital Management in the UK.

The store was subsequently closed, pending redevelopment.

This year, the US firm also gave finance to the new owners of Clerys to buy a portfolio of property adjacent to the former department store, which will feature in a broader redevelopment of the area.

The so-called Spire portfolio consists of properties on O’Connell Street and Sackville Place.

Quadrant is also funding the purchase by Dublin-based property company Tetrarch Capital of a number of buildings on Townsend Street in the capital, which are earmarked for mixed development, to potentially include a hotel, student accommodation and offices.

"We're very optimistic about the outlook for Ireland," said Linda Nel, head of European operations at Quadrant.

“The country has terrific fundamentals and the outlook for economic growth is excellent. We look at a lot of markets around the world and in Ireland we really like what we see.”

Ireland’s commercial property market has rebounded from the worst crash in Europe to deliver an annualised total return of 26 per cent in the three years to March, according to the latest figures from the Society of Chartered Surveyors Ireland and Investment Property Databank.

This has been driven by office space, followed by retail and industrial property.

Lowest-risk projects

Quadrant, with $6.4 billion (€5.6 billion) of assets under management, is among a number of non-bank financers to enter the Irish market as domestic lenders, battered by the financial crisis, restrict their finance to the lowest-risk projects.

Others include US private equity firm KKR, Elkstone Private Advisers and a venture between Cardinal Capital in Dublin and New York billionaire Wilbur Ross.

Quadrant’s development of an Irish fund comes a year-and-a-half after the Central Bank of Ireland began to allow certain Irish-based funds, governed by the EU’s Alternative Investment Fund Managers Directive, to originate loans directly.

The rise of non-bank lending, or shadow banking, in Europe in recent years follows a massive deleveraging of the continent’s banks as they face stricter capital rules.