Irish property funds suspend client withdrawals amid cash calls spike

Irish Life has become the latest fund manager here to suspend withdrawals from its property fund, as rising interest rates across the UK and Europe has seen a sharp jump in investors looking to withdraw their money. New Ireland and Zurich Life have taken similar moves in recent weeks.

Effective from March 3rd, Irish Life has imposed a six-month notice period for withdrawal requests from one of its funds, the €500 million flagship retail investor-focused Irish Property Fund, whose holdings include the Pavilions Shopping Centre in Swords, as well as 70 St Stephen’s Green, a newly-built office building, and 1 Harbourmaster Place, KPMG’s current HQ in the IFSC. Its other fund, the €1.7 billion Exempt Property Fund, is not impacted.

A spokesman says that the decision was taken “due to the recent increase in the level of customer withdrawals from this fund”.

Introducing a notice period means that the fund will have time to make “any property sales as required to pay future withdrawals”.

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The move comes against a background of rising interest rates, which are pushing up funding costs.

Fearing write-downs in the valuation of such funds, investors have looked to get their money back. However, funds have put a stay on such withdrawals, as it can take time to sell a property to fund redemptions.

Bank of Ireland, which owns New Ireland, disclosed on Tuesday, as it unveiled full-year results, that it expects Irish commercial real estate prices to decline by 6 per cent this year and a further 2.5 per cent in 2024 as sentiment towards the sector is hit by rising interest rates and more people working from home in the wake of the Covid-19 pandemic.

“Commercial real estate is an area of some concern,” Bank of Ireland chief executive Myles O’Grady told reporters. While he said that he is not worried about the residential property construction part of the real estate market, given ongoing undersupply of homes in the State, the office market “is an area of watch out”.

Three years ago, a number of other life and pension firms moved to impose six-month notice periods and, in some cases, temporarily suspend withdrawals from property funds after they saw a sharp increase in clients pulling money at the onset of the Covid-19 crisis.

Withdrawals across a number of UK property funds have also been suspended in the past six months to prevent a stampede of exits.

On February 20th, Zurich Life moved to restrict redemptions on its Zurich Life Property Fund. New investments into the €33 million fund are also not currently allowed, a spokesman said, while it’s not clear how long it will last for, as there is “no specific time limit on this suspension”, he said.

As with Irish Life, Zurich took the decision due to increased outflows from the fund. One of the properties in the fund, Temple House in Blackrock, which is let to companies including Irish Life, was put on the market for about €10 million last year.

Late last year, New Ireland said it wouldn’t accept investments in, or withdrawals out, of its PBIS European Real Estate Fund “until further notice”.

Not all Irish property funds have been impacted. Aviva, which merged its two property funds into the Aviva Irish Commercial Property Fund, last year, says it has not closed the fund to withdrawals.

The last time this happened was back in early 2020, when an increase in requests for redemptions led to property funds halting outflows, an issue which was subsequently exacerbated by the Covid-19 pandemic, before being resolved.