US private equity giant Oaktree is planning a fourth-quarter initial public offering (IPO) of a UK property company that will initially hold more than 700 apartments being developed on the former Irish Glass Bottle site, according to sources.
The company being listed, called CompassRock International, carried out site visits for potential investors at the Dublin site last week as well as at its other anchor buy-to-let apartment assets in England, the sources said.
One source said that Oaktree executives were “very positive” about the flotation prospects after the site visits. That is even though other apartment real estate investment trusts (Reits), such as Grainger in London and Ires Reit in Dublin, are trading at a discount to their net asset values.
The prospect of another series of interest rate hikes by the Bank of England and European Central Bank (ECB) to fight inflation stoked by the impact of the Gulf conflict on energy prices has been weighing on property companies in recent times.
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However, the source highlighted that CompassRock International’s initial – or seed – portfolio is made up of modern, purpose-built apartments and a “very strong management team”, led by chief executive David Woodward. The director over the Irish portfolio is Pierre Melhado.
Ires Reit said in its latest annual report that the average age of its portfolio of more than 3,600 apartments is less than 20 years, with most between 15 and 19 years. Grainger does not disclose such detail, but its portfolio is known to contain older legacy assets, even if it has a large development pipeline.
Oaktree, which plans to retain 75 per cent ownership of the Reit, appointed investment banks Citigroup and Jefferies to manage the potential flotation, with a view to raising £500 million (€577.3 million) of fresh equity that will be used, along with debt, to build out the portfolio, sources said in March.
The driving forces behind the IPO project are senior Oaktree property executives, Derek Rich and Charles Blackburn, sources said at the time.
The initial Irish portfolio is understood to comprise a 212-unit building called Lime House, the site’s first residential building, which was completed in November, and two further blocks – Sand House and Batch House – that are set to contain 495 homes when they are finished later this year.
Oaktree owns an 83.3 per cent stake in Pembroke Beach, the joint venture behind the landmark development. A further 11.7 per cent is held by developer Johnny Ronan’s Ronan Group Real Estate (RGRE), with the remaining 5 per cent owned by a company linked to Lioncor, co-developer of the site, which is ultimately due to deliver about 4,000 homes.
It is expected that RGRE and Lioncor will no longer have equity stakes in the three IPO-bound buildings by the time of the flotation. CompassRock International was hired a number of years ago as property manager of apartments built on the Glass Bottle site, but its executives will become the internalised management team of the wider portfolio being floated.
Future stages of the Glass Bottle site project will offer natural acquisition opportunities for the trust. However, it is expected that the UK will be by far the more important market for future asset purchases. Initial UK assets will include Oaktree build-to-let apartment buildings in Bristol, Southampton, Walton-on-Thames and Farnham in England.
A spokeswoman for Oaktree declined to comment on the planned IPO.
