Green Reit exits retail sector

Property investor eyes logistics opportunities as investment manager gets €20m in fees

Green Reit profit for the year to June 30th rose 11 per cent. Photograph: Cyril Byrne

Green Reit profit for the year to June 30th rose 11 per cent. Photograph: Cyril Byrne

 

Property investment company Green Reit has sold out of the retail sector in favour of opportunities on the logistics side, as the company continues to benefit from a strong Irish property market with full-year profits advancing by 11 per cent.

The company, which once counted the Westend Retail Park in Blanchardstown, Dublin 15, among its assets, said on Tuesday that it had reduced its retail holdings from about 20 per cent of its portfolio to a “pretty much non-existent” level.

“We’re out,” said chairman Stephen Vernon, adding that the investment company had rotated its capital out of retail, selling out with “substantial profits” and moving its money into logistics instead.

“Retail is challenged across the world, particularly malls, as they need a lot of ongoing investment,” he said. “It’s not an Irish thing: across the world retail is challenged,” he added.

Green Reit is focusing on logistics, driven by ecommerce disruption and high in internet growth, according to Mr Vernon. Logistics currently accounts for about 8 per cent of its portfolio, but the company expects to bring this up to about 20 per cent. As part of this, it will continue with its strategy of building “a moderate level of speculative units” at Horizon Logistics Park in north Dublin, while at the same time competing for larger and/or more specialised purpose built units.

Profit up

Green Reit’s pivot comes as it announced full-year results for the year to June 30th, which showed that profits rose 11 per cent in the year, as the property investment firm benefited from a strong property market.

Pretax profits rose to €144.2 million as earnings per share rose 10 per cent to 20.8 cent. The company’s total portfolio value rose to €1.42 billion, up from €1.38 billion a year earlier.

During the period, rental income increased by 12.4 per cent to €67.9 million.

Net asset value per share rose 8 per cent to €1.79 per share despite the increase in stamp duty in October 2017.

“The past 12 months has been great for us on all fronts, particularly our development success across our major office projects and our profitable capital recycling programme from the retail sector into logistics, where we believe there are strong growth prospects,” said chief executive Pat Gunne.

“The Irish property market remains well supported by our growth economy, our expanding employment base and a diverse international investor set which continues to find our market attractive, underpinning our positive outlook.”

Goodbody Stockbrokers analyst Colm Lauder said it was a “strong” set of results, beating expectations “with an outperformance that has been delivered through skilled and timely asset management”.

The year was also good for the property fund’s investment manager, which enjoyed a 20 per cent rise in remuneration. Green Reit said it paid its investment manager, Green Property Reit Ventures, of which Mr Gunne and Mr Vernon are directors, a base fee of €11.8 million, up from €10.8 million in 2017. The manager was also paid a share-based performance fee, of some €7.8 million, up from €5.7 million previously.