Property investment group Ires Reit targets 2017 rent rises

Ireland’s biggest private landlord says rents rose €35 a month to €1,399 in first half

Beacon South Quarter in Sandyford, Dublin, where Ires Reit is building 68 apartments at a cost of about €22.7 million. They are expected to generate a gross yield of 8.5 per cent to 9 per cent. Photograph : Matt Kavanagh

Beacon South Quarter in Sandyford, Dublin, where Ires Reit is building 68 apartments at a cost of about €22.7 million. They are expected to generate a gross yield of 8.5 per cent to 9 per cent. Photograph : Matt Kavanagh

 

Property investment company Ires Reit said on Monday that its property portfolio achieved a gross yield of about 6.5 per cent on passing rent of € 40.8 million in the first six months of the year, with occupancy rates rising to 98.3 per cent on the back of strong demand and muted supply.

Ires Reit is the largest non-governmental landlord in Ireland with 2,288 apartments.

“We continue to grow our bottom line and expect growing and secure dividends going forward, derived from professional management and the quality of the portfolio,” said chief executive David Ehrlich. “We are also excited about our development opportunities. All of this bodes well for the continued growth of Ires.”

Apartments acquired

In the six months to June 30th, the group acquired 674 apartments for a total cost of €153.6 million (including VAT and other transaction costs), bringing its total number of apartments to 2,288. As of June 30th the group had invested almost €600 million across 17 locations in the Dublin area, funded through a combination of equity and debt. Operating revenue rose 60 per cent to €17.9 million.

The introduction of new rental legislation earlier this year, which restricts rent increases to every two years, meant that only 8.7 per cent of the apartments renewed during the period were subject to rent increases, Ires Reit said.

Nevertheless, the group generated strong rental growth and increased occupancy across the portfolio since the end of 2015.

Average monthly rent for the total portfolio increased to €1,399 per apartment, up from €1,364 at June 30th, 2015. With a “substantial portion” of the portfolio up for renewal in 2017, Ires Reit said this would provide an opportunity for rental increases. The investment company achieved an occupancy rate of 98.3 per cent during the period.

As of June 30th, the total property portfolio had an annualised passing rent of €40.8 million, representing a gross yield at fair value of about 6.5 per cent, up from €21.8 million and about 6.3 per cent for the same period in 2015.

Brexit

With respect to Brexit, Mr Ehrlich said it could strengthen the Ires proposition.

“While we appreciate that Brexit introduces a degree of uncertainty into the European Union, we don’t believe it will have a material or negative impact on our business,” he said.

Ires said it has commenced construction of 68 apartments at Block B2B at Beacon South Quarter in Sandyford at an expected cost of about €22.7 million (including allocation to development land costs).

Looking ahead, the company has an acquisition (including development) capacity in excess of about €150 million based on a target gearing of 45 per cent.

Positive economic outlook

“We believe the positive economic outlook for Ireland and its property market will lead to increased demand in the residential rental sector, which should result in continued improvement in the performance of the company over a sustainable and long-term basis,” said chairman Colm Ó Nualláin.

While the current planning guidelines and the high cost of new construction will make it difficult for the severe shortage of accommodation to be rectified, at least over the medium term, Ires Reit could stand to benefit, as it has capacity at its existing properties to build between about 600 to 650 apartments, the company said.