US investor has €2bn to spend on Irish construction

US investor Avenue Capital could spend €2 billion over the next four years funding home and commercial building in the Republic after buying a stake in local lender, Castlehaven Finance.

Castlehaven confirmed on Friday that Avenue had bought out Pollen Street, the Irish company’s previous backer, for more than €250 million, giving it both a stake in the Dublin-based lender and ownership of loans given to builders.

Avenue intends lending €500 million annually for the next four years through Castlehaven to developers to fund the construction of new homes, shops, offices and hotels.

Outside the €250 million or so that the fund is spending on buying into Castlehaven, this will bring its total investment in the Republic to €2 billion over the next four years.

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Avenue hopes to cash in on the demand for rented homes by lending to developers to build apartment blocks that can be sold to investors who will lease out the individual homes to tenants.

Existing players such as Cairn Homes, which last year sold an apartment block on Dublin's Hanover Quay to Carysfort Capital for €101 million, and is selling a similar property in the city's western suburbs, have already taken this route.

Avenue and Castlehaven also hope to expand into backing commercial building, including hotels, offices and shops. Using cash provided by Pollen Street, Castlehaven recently financed a 149-bedroom hotel on James Street in the capital for the Dublin Loft company, a business owned by Mark, Andrew and Kelly Cosgrave.

The deal announced on Friday means that Avenue will step into Pollen Street’s shoes. Castlehaven will find the builders and projects to which the US company will lend its money.

The Irish business will be responsible for managing the loans and dealing with the clients. Avenue is taking a stake in Castlehaven and will pay it a fee for acting on its behalf. The pair are understood to be days away from backing their first project.

Debts

Avenue will also take over debts owed by existing Castlehaven clients to Pollen Street. New York-based Avenue manages $10.3 billion for its clients. It specialises in property lending and “distressed debt”, which is where borrowers face difficulties in repaying their liabilities, along with other businesses.

Run by partners Will Aylmer and Clark McCann, Castlehaven has loaned €584 million to 118 residential and commercial building projects since 2014. It is on track to provide €300 million to various developments this year.

Castlehaven recently agreed to finance the construction of 74 new homes that developer Patrick Durkan's DRES is building in Delgany, Co Wicklow. It has backed the construction of hundreds of social and affordable homes in counties Dublin, Louth and Meath.

The company joined forces with London-based Pollen Street Capital in 2016. The UK fund, which has assets of about £1.2 billion, loaned €385 million to builders through Castlehaven since then, mostly for new home construction.

In a statement yesterday, Mr McCann said Castlehaven looked forward to working with Avenue on build-to-rent and commercial building projects.

“As the new partnership with Avenue allows us to scale up, we’ll be increasing volume and providing new opportunities to current clients, along with developers we’ve never worked with before,” Mr McCann said.

Lindsey McMurray, Pollen Street’s managing partner, said that the business had a successful relationship with the Irish lender since 2016.