The Irish Pension Fund Property Unit Trust delivers very substantial returns to its pension fund customers, with unit holders receiving 20.2 per cent after inflation on investments during 1999.
It holds a mix of office, retail and industrial properties with a strong bias towards office. Properties held in Ireland in 1999 were valued at about £350m with £222m in office blocks, £92m in retail and the remainder in industrial.
Its two showcase investment properties are the 45,000 sq ft Arthur Cox Building at the Earlsfort Centre, Dublin and Block B on George's Quay, the Price Waterhouse Coopers building. It owns many other high profile buildings such as Fitzwilton House and Gardner House at Wilton Place, Dublin, Alexandra House at the Earlsfort Centre, 25/28 Adelaide Road, and properties on Leeson Street, Burgh Quay, Charlemont Place, Pembroke Road and Lr Mount Street, to name just a few.
Retail holdings include properties in some of Ireland's leading commercial avenues as well as three properties on Grafton Street, 45 Henry Street and a substantial group of buildings on Patrick Street, Cork. The Trust is investing in a refit and major expansion of its Wilton Shopping Centre, it owns Roselawn Shopping Centre and has other retail holdings in Wicklow, Drogheda, Limerick, Mullingar, Tralee, Waterford and Wexford.
Although it has a small industrial holding compared to its office portfolio, it has properties in some high profile centres, including the Airways Industrial Estate, Airton Road, Tallaght, Broomhill Business Park and Sandyford Industrial Estate. It has also made recent substantial investments in the Swords Business Campus.
Its property yields are very much in line with the bible of the industry, the Society of Chartered Surveyors Irish Property Databank, according to the Trust's chief executive, Mr Gus MacAmhlaigh. It performed better than the Databank figures in seven of the past 16 years, although for the most part, variations between the two are usually only a matter of a few percentage points.
That was a good performance considering that the Trust operates on a very low risk basis, says Mr MacAmhlaigh. And because the Trust has a tax-exempt status, it doesn't compete with tax-driven investment opportunities such as those available in the Dublin docklands, cutting it off from these high yield options.
Yields vary between market segments. Equivalent yields (internal rate of return) after allowance for revisions based on 1999 rental values gave 5.3 per cent from office holdings, 5.5 per cent from retail holdings and 6.7 per cent from industrial holdings. These were marginally down on the 1998 figures, in part because of a large cash pool of between £45m and £50m left uninvested after the sale of the Dun Laoghaire and Dundrum shopping centres.
All of its investment funding comes from the existing unit holders already with the Trust. "We have never borrowed to date," he says, even though by law it is entitled to borrow up to 20 per cent of the investment requirement.
The Trust is always in the market for good property investments and would go to unit holders several times a year to pursue new deals. "We would be actively looking for investment opportunities in the region of £5m to £50m. That would be the limit."
It could, he adds, transact bigger deals in partnership with other pension fund investors, companies such as Canada Life, BIAM or Irish Life.
The Trust is changing the way it does business with a view to becoming more proactive. It is talking to tenants and clients asking what they need and is looking for new kinds of partners, particularly developers. "We would consider doing joint developments with a developer and we are talking to a number at the moment."
