Republic’s investors eye NI property deals

Signs are emerging that investors from the Republic are once again making a path to Belfast to spend a modest couple of million or so on potential bargains in the local property market.

We’re not talking anything like the hysterical amount of money that was waved around eight years ago. These days it is a more muted affair with less cash on the table, no flash bankers in the picture and a definite emphasis on “value” and “liquidity”.

But there is evidence that investors from the South have a new appetite for property deals in the North, not least because of the strength of the recovery in the Dublin property market.

According to Brian Lavery, managing director of CBRE Northern Ireland, the market is enjoying a "ripple" effect from the faster-paced commercial property market further south in Dublin.

“Belfast and Northern Ireland represent very good value compared to prices in Dublin and London . . . we are seeing a lot demand from both institutional buyers and individuals, particularly for prime assets,” says Lavery.

The investment sector first began to show signs of life again in the second half of last year as the “process of deleveraging kicked off”, he adds.

Nama factor
Lavery believes improving economic conditions and more debt-funding options are likely to further revive the market this year. He expects more property controlled by the National Asset

Management Agency to be released for sale in the coming months and various financial institutions to continue off-loading property assets which will “create more opportunities” for investors.

Declan Flynn, managing director of Lisney Belfast, is also confident that the "fundamentals for a sustainable recovery in the property market are in place".

Lisney’s research shows that property investment deals in the North increased sixfold between 2011 and 2013 – “albeit from a low base”, says Flynn.

The total value of property assets sold, under offer or brought to market last year, was some £150 million (€180 million), according to Lisney. Compare this to transaction volumes in 2011 – about £25 million – and it not a big leap to see why commercial property consultants believe investment volumes will continue to grow this year.

The influx of institutional investors, some of whom were new to the North, last year, such as Threadneedle Investments, BAE Pension Fund and Pramerica, has changed the profile of who owns what, particularly around Belfast.

As Lavery notes, a walk around Donegall Square in the heart of the city centre reflects the changing times. Historically the landmark buildings, which are home to the likes of Ulster Bank and Dankse, had always been held by institutional investors. By the mid-2000s, they had become a must-have statement purchase for some local property developers high on a cocktail of bank debt and overinflated egos. Today the balance of ownership is shifting back to the institutions.

Last year RBS, Ulster Bank’s parent company, completed a sale and lease-back transaction on Ulster Bank’s headquarters on Donegall Square and its Danesfort offices in the city.

The deal, which also included a bank branch in Dublin, was estimated to be in the region of £30 million and attracted more than 20 bids – primarily it appears based on what was on offer in Belfast.

Warped aspirations
The serious return of the fund buyers to the North signals the end of a chapter for some local property developers who never really had the means to support their distorted ambitions.

Many in the sector argue that it also reflects a growing confidence in Belfast, and Northern Ireland in general, as an investment location.

Discussions underway are likely to result in more funds choosing Belfast as a good place to put their money this year.