US investment firm Quadrant Real Estate Advisors is understood to have provided €30 million of finance for Dublin deals so far this year as banks remain reluctant to fund speculative development deals following the property crash.
The Atlanta-based company gave funding 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 Street.
Quadrant previously part-funded the purchase of the Clerys building last year by Irish investment group D2 Private, led by Deirdre Foley, and Cheyne Capital Management in the UK. The store was later closed pending redevelopment. The financing used is called senior stretch finance, which carries higher risks than straight senior loans and can command interest rates of up to 10 per cent.
Mixed development
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, according to sources.
The US firm, which last year signed a €100 million agreement with the Irish Strategic Investment Fund to finance office and other commercial property development, is among a wave of non-bank financiers to back deals in a recovering market in Ireland in the past few years as banks, scarred by the crash, largely eschew this corner of the market.
Troubled portfolios
Other entrants include US private equity firm KKR,
Elkstone
Private Advisors and a venture between Cardinal Capital in Dublin and New York billionaire
Wilbur Ross
.
"Banks are largely out of the space of lending for speculative development at the moment, as they deal with their remaining troubled residential land and development portfolios following the crisis,'' said Diarmaid Sheridan, a banking analyst with stockbrokers Davy.
“In addition, banks are required by post-crisis rules to set aside more capital for risky types of lending, leaving them at a big competitive disadvantage compared to non-bank lenders.’’
While builders relied on bank loans for up to 100 per cent of a project’s cost during the boom, banks now typically offer a maximum 65 per cent funding for commercial developments where end tenants or buyers have been secured.
Minister for Finance Michael Noonan has said that Irish builders and developers must “embrace the financing options that are available” or face being left behind.
