Ireland’s sovereign wealth fund has joined with KKR Capital to launch a €500m residential property joint venture.
The €7.6bn Ireland Strategic Investment Fund (ISIF) will contribute €325m toward the venture, its largest-single investment to date, with KKR providing the remaining €175m.
The resulting manager, Activate Capital, will lend to Irish residential development projects.
It estimated it could help finance the construction of more than 11,000 homes, going a long way towards the government’s stated aim of seeing 25,000 new homes by 2020.
Robert Gallagher, a director at KKR responsible for its Irish business, has been named Activate’s chief executive.
Dan O’Connor – executive chairman at AIB Group until late 2010 and the person responsible for developing the concept behind Activate – will chair the board.
ISIF’s head of private equity Fergal McAleavey said Ireland faced a “significant mismatch” between housing demand and supply.
“Our joint venture will help to address this by providing funding on a commercial basis to development projects capable of delivering over 11,000 new homes,” he said.
“With this joint venture, we are also establishing a major new non-bank lending platform that can continue to provide financing to the sector for many years to come.
“This will bring additional benefits to the Irish economy in the form of increased lending capacity and increased competition in the market for residential development lending.”
Irish minister for finance, Michael Noonan, said the venture was a “win-win” for the state, citing the economic and social impact of the measures due to increased employment.
In line with the sovereign development fund’s target for achieving a commercial return and a positive economic impact, ISIF and KKR estimated that the investment would help create 1,900 full-time jobs a year.
ISIF’s involvement in Activate comes less than a month after it published its investment strategy, which highlighted real estate as one of the key areas to invest its nearly €6bn in assets.