Ires Reit’s profits soar on back of Irish housing crisis

Firm notes that all indications are that a solution to the housing crisis is years away

Ires Reit got its timing right and looks like a star performer. Photograph: Frank Miller

Ires Reit got its timing right and looks like a star performer. Photograph: Frank Miller

 

Timing is everything, they say. Ires Reit’s timing looks spot-on. The Canadian-backed company floated on the Irish Stock Exchange in April 2014, as it was becoming clear the State was facing a housing crisis that would push up rents and property values.

Yesterday Ires Reit released results showing growth across the board. Net rental income was up more than 20 per cent at €17.9 million, average rents grew 4.3 per cent to €1,459 a month and the value of its properties rose €19 million.

Its board intends returning more than €10 million in dividends to investors, their share of the nearly €12 million in distributable reserves that the company had on June 30th. It returned €20.4 million to backers, including 15.7 per cent shareholder, Capreit, last year.

This looks set to continue. Ires Reit notes that all key indicators show a solution to the housing crisis is still some years away. The ongoing shortage of homes will continue to push up rents, albeit at the 4 per cent limit set by legislation in December, and the value of the 2,381 apartments that the company owns in Dublin.

Star performer

Ires Reit arrived here as the property market was travelling in the right direction, but before values started soaring, allowing it to get decent assets at good prices. It correctly spotted that demand for accommodation was only going to go one way as well.

All those factors have remained in place and the company looks like a star performer. If it were operating in a less benign environment, or even a functioning – rather than dysfunctional – residential market, it is unlikely that it would look so good.

There are immediate threats to the current environment. Ires Reit itself highlights US policy’s likely impact on investment, and Brexit. They should not be underestimated, but in the long term, the market here will normalise, leaving the company with more pedestrian returns.

For many investors, that means that at some point they are going to decide to cash in or cut their exposure. For them, it is only a matter of when. In other words, it will boil down to timing.

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