Cantillon: Two strategies but which Reit is wrong?

Two real estate investment trusts appear to be developing contrasting approaches

At the recent Hibernia Reit AGM: chief executive Kevin Nowlan,  chief financial officer Tom Edwards Moss and chairman Daniel Kitchen.  Photograph: Aidan Crawley

At the recent Hibernia Reit AGM: chief executive Kevin Nowlan, chief financial officer Tom Edwards Moss and chairman Daniel Kitchen. Photograph: Aidan Crawley

 

Despite operating the same business in more or less the same market, the stock exchange’s two main real estate investment trusts – Reit – appear to be developing contrasting approaches.

Green Reit said in a management statement yesterday that it would be selective about new acquisitions and would buy only on the basis that the property fits its strategy and boosts its value. Chairman Gary Kennedy noted that it would keep its debt-to-asset ratio “prudent”.

The tone more or less echoed that of September’s full-year statement, when the company made it clear it was shifting focus from buying properties to managing and developing what it has.

In fact, at that time, it all but ruled out adding to its existing portfolio in the near future.

By contrast, Hibernia Reit, which published interims just days ago, has agreed a new €400 million, five-year loan with its banks and plans to remain very much in the hunt for new acquisitions, with a particular focus on Dublin’s central business district.

There are differences between the two: Green was first out of the traps, floating six months before Hibernia; Green has one property outside Dublin, Hibernia is unlikely to stray outside the capital.

However, the similarities, right down to structure and regulation, far outweigh these, so why the contrast?

The answer is that their managements have different views of the same thing: the Dublin office market.

This is where both have their biggest exposures. Hibernia’s Kevin Nowlan (pictured) said last week that potential tenants are seeking three million sq ft in office space in Dublin, but there is just 2.5 million sq ft under construction.

In September, Green’s Pat Gunne said that the city could be facing oversupply from 2018.

Only time will tell which is correct but for now their approaches mean that one is a useful hedge against the other. After all, the two Reits can’t be wrong.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
GO BACK
Error Image
The account details entered are not currently associated with an Irish Times subscription. Please subscribe to sign in to comment.
Comment Sign In

Forgot password?
The Irish Times Logo
Thank you
You should receive instructions for resetting your password. When you have reset your password, you can Sign In.
The Irish Times Logo
Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.
Screen Name Selection

Hello

Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
Forgot Password
Please enter your email address so we can send you a link to reset your password.

Sign In

Your Comments
We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.