Irish Residential Properties REIT (I-RES) has conducted a strategic review that has identified approximately 315 assets for disposal over the next 3-5 years.
Ireland's largest private landlord anticipates generating €110-115 mln in proceeds from the sale and plans to reinvest these funds according to its capital allocation strategy.
The assets represent around 8% of the total portfolio and approximately 23% of the company’s market capitalization.
In the first half of 2024, I-RES sold six individual assets, generating roughly €2 mln in net proceeds, representing a significant premium over their latest book values.
I-RES's portfolio value declined from €1.27 bn at the end of 2023 to €1.24 bn as of 30 June 2024. This decrease was primarily due to a slight increase in interest rates, partially offset by rental income growth. As a result of the higher interest rate environment, the portfolio's net initial yield expanded by 0.2% to 5.1%, leading to a non-cash valuation loss of €32.5 mln.
This impacted the company's financial performance, resulting in a pre-tax loss of €20.3 mln and a decrease in net asset value per share from 131.7 cents to 126.4 cents. Despite these challenges, I-RES maintained a strong financial position with a net loan-to-value ratio of 45.4%, well within both debt covenants and regulatory limits.
The Board concluded that, following rigorous market testing, the sale or liquidation of the entire issued share capital or assets is highly unlikely to deliver value. Additionally, no proposals were received to acquire the company during the course of the Review.
The strategic review has identified key strategies to enhance shareholder value over the coming years. These include generating additional revenue streams, streamlining operations to boost profitability and prepare for expansion, and capitalizing on opportunities to expand and consolidate the company's position in the Irish private rental sector, collaborating with stakeholders to improve the residential rental market and REIT regulations in Ireland, and exploring opportunities to work with the government on affordable housing initiatives, such as Secure Tenancy Affordable Rental (STAR) scheme.
Eddie Byrne, CEO I-RES, commented: ‘While overall we believe the outlook is positive, the current Irish rental regulatory structure remains the single most inhibiting factor for our business. The 2% cap on rental increases has had a profound impact on the supply of new build-to-let properties in the market and is an impediment to critical international investment. We believe that a more progressive and evidence-based regulatory framework that is fair and equitable to both the resident and the property owner, will attract institutional capital and help to alleviate the current supply shortage while also providing safe and secure tenancy for residents.’
