REIT secures €150m to expand property portfolio

The Irish Residential Properties (I-RES) REIT has agreed a deal that will provide it with an additional €150m in acquisition funding which is to be used for expanding its portfolio of high-quality properties.

I-RES has entered into an agreement with the Canadian Apartment Properties Real Estate Investment Trust (CAPREIT) to make a “pipeline facility” available to the Irish REIT.

The “pipeline agreement”, which is subject to shareholder approval, comes with a one-year term and is to be used to acquire ‘high qualities properties in Ireland’, the company said in a statement to the Irish Stock Exchange.

“Since I-RES’s funds are fully invested and I-RES’s gearing is nearing the maximum permitted level under Irish REIT legislation, I-RES has entered into an agreement with CAPREIT in order to permit I-RES to participate in forthcoming sales processes for additional suitable property investments within its investment policy,” the statement reads.

CAPREIT has also been selected as the preferred bidder to acquire the “Rockbrook” property portfolio for approximately €88.9m, which is the first proposed transaction to utilise the pipeline facility.

Since its establishment, IRES has deployed all of the €192m net proceeds from its IPO and utilised €125m of the €130m credit facility it agreed with Barclays.

“While Irish REIT rules on gearing would permit IRES to borrow a further €50m- €60m, in the absence of any capital raise, this potential firepower is modest compared to the quantum of assets that are being brought to market at this time by the banks and other institutions that are looking to reduce their direct exposure to Irish residential properties,” an Investec analyst said.

Meanwhile, Davy Stockbrokers said that the financing had been secured at an opportune time.

“Nama brought the Plum Portfolio, which consists of 588 multifamily units in seven properties in Dublin along with ancillary commercial space, to the market in October. The portfolio has a guide price of €116m, reflecting a net initial yield of 5.9%. With the ambition to assemble between 2,500 and 3,000 multifamily units in Dublin, the ‘pipeline agreement’ comes as I-RES enters the next phase of its evolution,” analysts said.