IRELAND – Investors with €3bn to spend are targeting Irish property as the economy returns to growth – but core investors will struggle to source assets, and some private equity firms have failed to make deals within limited timeframes, according to pan-European manager Ardstone Capital.

Donal O'Neill, co-founder and investment head, said: "The worst has passed, and both the country and investors have passed an inflection point already."

Ardstone reckons the market has seen €1.35bn of transactions occurred since the last quarter of 2011, including the sale of four non-performing loan (NPL) portfolios.

"A year ago, we were seeing core assets at value-added pricing," he said. "Now, core assets are starting to attract more attention and will trade closer to normalised," said O'Neill.

He pointed to the compression of prime yields from 7.25% to 6.75% since the end of 2011 as an example.

"The core market is always the first to attract investors, and it reprices quickest," he said.

"Competition for core assets will be stiff, largely from local institutions and some foreign core funds."

At the same time he explained how the NPL buyers were "doing much of the dirty work and helping to clear the market", he said some private equity groups had failed to commit capital and might move to larger markets such as Spain.

According to Ardstone, two-thirds of the capital trained on Irish real estate is coming from overseas investors, most with an opportunistic appetite.

"Private equity firms are taking on country and their own time-allocation risk," he said. "It is not that easy to deploy capital, especially where they most likely need to work with local parties to source and manage deals.

"On the other hand, the big core funds won't take on refurbishment jobs, which thins out the amount of players for higher-end core-plus and value-added assets."

The firm, which has avoided the Irish property market since 2002 and ceased all new investment across Europe in 2007-09, is now targeting the higher-end core-plus and value-added opportunities in the undersupplied prime Dublin office market.

It acquired an office asset earlier this month as its first foray into the market.

According to Ardstone, NPLs totalling €15bn in assets are likely to reach the market in 2013-14 following the liquidation of failed bank IBRC.