Irish to invest over €2bn in UK property during 2005

Experts in the industry believe that the volume of money going into the UK will continue to exceed €2 billion in the immediate years ahead, writes Jack Fagan

The immense wealth accumulated by Irish property investors over the past decade means that they will increasingly have to look abroad and particularly to the UK for investment opportunities. This year the Irish spend in the UK alone hit a record €2.5 billion largely because of the limited opportunities at home to acquire product.

Experts in the industry believe that the volume of money going into the UK will continue to exceed €2 billion in the immediate years ahead.

While some of the biggest deals this year involved direct investment by wealthy individuals, a range of private banks, accountancy firms and estate agencies handled other investments through syndicates, unit linked funds and a variety of partnerships.

CBRE Gunne became one of the biggest players through its international links with CBRE which this year handled 29.8 per cent of all commercial sales in central London, excluding the €1.1 billion Savoy deal which was completed by Quinlan Private.

Some of the most notable deals that were handled by CBRE Gunne included the off-market acquisition of Marks & Spencer on the Kings Road in London by a syndicate put together by Jaguar Capital for €200 million; the off-market acquisition of CAA House in London's midtown market by a syndicate formed by KPMG for €149 million; and the off-market purchase of 100 Victoria Embankment, the headquarters of Unilever by a private Irish syndicate for €258 million.

The private investors were also playing big games during the year buying 17-18 New Bond Street let primarily to Louis Vuitton for €75 million.

Another notable acquisition was the purchase of Priory Court and Temple Court in Birmingham, both let to the Secretary of State, for €182 million.

Stephen Gunne, CBRE's head of European investments, says Irish buyers are accustomed to complicated investment structures and therefore can get their mind around corporate acquisitions abroad.

There was a very sophisticated investment market in Ireland in terms of individuals participating compared to the rest of Europe. Last year alone, Dublin investment income going into UK properties had risen by 70 to 80 per cent. Overseas investors, he said, would like to come into Ireland but the market was so competitively priced compared to the rest of Europe that they now go elsewhere.

Caroline McCarthy, director of international investment with CBRE Gunne, said Irish investors have found that properly structured deals, such as unit trusts, can be tax-effective and offer liquidity going forward. This provided a way of diluting the units, creating a secondary market without having to trigger a sale and creating liquidity to allow a further purchase if that was required.

Ms McCarthy says: "Everyone asks 'why there is so much money leaving the country? Why is there so much going to other places?' Well, it is because of demand but also there is such a scarcity of product here. The institutions who hold big chunks of property would probably trade more if it was not so expensive to exit and re-enter the market because of the high stamp duty."

Ms McCarthy also said that some of the Irish investors going into the UK occasionally opted for a gearing of up to 85 per cent but, for trophy properties such as retail investments on Bond Street, the figure usually dropped to about 70 per cent.

Mr Gunne said that private investors, whether from Ireland, Germany or Holland, have been using leveraged money to price the institutions out of the London market.

They were now in a dominant position in central London and they had effectively pushed the institutions out into the out-of-town locations. "The Irish have played quite an important part in all of this."

Mr Gunne also said that Irish money was now more interested in what stage the property cycle was at in the UK. They were looking for development sites and were prepared to take a risk in order to get higher returns.

He said: "The Irish developers are coming over to London and bidding on sites with mixed success because it is quite a local market from a development prospective and, while the Warrens, the Quinlans and Bank of Ireland Private have quite a good reputation in the market, the smaller developers have less of a reputation they can rely on."