Ireland's Green REIT shifts focus to asset management

Green REIT, an opportunistic investment vehicle set up in 2013 to capitalise on the rebound in Irish property values, said it is shifting its focus from portfolio assembly to asset management and development as a new phase of the property cycle unfolds.

‘The Irish property market is shifting from an opportunistic phase to a more stable stage of the property cycle. The result for us is that we are taking a more cautious view, focusing on asset management and moving towards a more regular dividend stream and a more balanced capital model,’ Green REIT’s executive chairman Stephen Vernon told PropertyEU in an interview.

The company has built up a 24-property strong portfolio over the past two years. Around 75% of Green REIT’s portfolio is made of offices in Dublin city centre.

‘We are very much focused on our development and asset management programme at the moment,’ added Vernon. ‘In the next three years over 50% of our rents is either breaking or coming to a lease end, giving us an opportunity to expand on our expired lease terms. That will be key to future performance particularly as we are underwriting a 25% return on capital.’

Green REIT's contracted annual rents amount to nearly €56 mln which will rise to €60 mln following the closing on the One Albert Quay office block acquisition in Cork, due in Q1 2016.

Full-year performance
Green REIT was the first real estate investment trust to list on the Irish Stock Exchange after the vehicle was introduced in 2013. It raised €300 mln at €1 a share in July 2013 and its shares are currently trading at €1.47.

The company reported a profit of €157 mln in the year ended June 30, 2015, up nearly four-fold on a profit of €43 mln reported in the same period a year earlier. EPRA NAV per share rose over 21% to €1.32 at end-June.

The Irish REIT entered the FTSE EPRA/NAREIT Global Real Estate Index Series in March and has since seen a shift in shareholder profile, Vernon said. ‘We used to have investors such as Franklin Templeton, Markfield or Pimco which wanted to take part in Ireland’s recovery. Now we are seeing more institutional players and traditional-type of REIT investors.’

The company's shareholders also include Stephen Vernon, its executive chairman and one of the country's richest businessmen, as well as hedge fund manager John Paulson.

Pipeline projects
Green REIT has five projects in the pipeline, three of which have already kicked off while the remaining two sites are going through the planning process. Major developments include Central Park, representing a joint venture with US asset manager Pimco, and the Horizon Logistics Park covering 77,000 sq ft.

To finance these projects, Green REIT recently obtained a new €150 mln loan from Barclays, with an option to increase the facility to €290 mln in the future. The company has a very moderate gearing level of 9.5% which may increase to up to 15% in the future.