Plans to raise as much as €350m for Ireland’s second real estate investment trust, Hibernia REIT, were finally lodged this morning with the investment management team, led by William Nowlan, seeking a larger maiden capital raising haul than Green REIT’s initial raise.
Nowlan Property REIT Management Limited, which is also jointly led by Kevin Nowlan, Frank J. Kenny and Frank O’Neill, will lead the investment management effort which is seeking to “assemble and proactively manage a substantial property portfolio of the envisaged scale and quality”.
A group of cornerstone investors have already committed €124.5m to the initial blind capital pool for Hibernia REIT, which will seek a join admission to the Irish and main market UK stock markets next month.
Daniel Kitchen, currently chairman of Workspace Group and non-executive director of LXB Retail Properties, will chair the Board of Hibernia REIT, with Colm Barrington, Terence O’Rourke and Stewart Harrington serving as independent non-executive directors.
Barrington is non-executive chairman of Aer Lingus Group and chief executive officer of Fly Leasing Limited; O’Rourke if the former managing partner of KPMG Ireland from 2007 to 2013 and current chairman of Enterprise Ireland; and Harrington is a former partner in Jones Lang Wootton and founding partner of Harrington Bannon Chartered Surveyors.
The management team will invest €3.5m in Hibernia REIT to align interests.
Hibernia REIT’s broad investment and pre-tax total return ambitions are, perhaps unsurprisingly, virtually identical to GREEN REITs. They include:
- is to assemble an institutional grade portfolio predominantly comprised of commercial property within the greater Dublin – individual assets between €10m to €50m – area and with a bias in favour of the office sector;
- a pre-tax targeted total shareholder return range of 10% to 15% per annum, with 85% of its available property income annually distributed to shareholders;
- leverage of below 40% loan to value at the time of borrowing, with a hard limit of 50% LTV;
- a significant portion deployment of capital raised within 18 to 24 months of admission.
Sourcing investment stock will come through a variety of channels, including: entering public bidding processes, off-market acquisitions, joint venture arrangements as well as through debt and equity investments to secure targeted underlying Irish commercial properties.
Property development and redevelopment investments will be restricted to a maximum 15% of Hibernia REIT’s net asset value.
Kevin Nowlan, chief executive officer of Nowlan Property REIT Management, the investment manager, said: “Dublin is a highly attractive place to do business and with the Irish economy improving, demand for commercial space is set to rise.”
Nowlan had been a leading industry lobbyist for REIT legislation for many years prior to the introduction of the legislation this summer, and established the REIT Forum in January 2011, a voluntary group of market participators who sought to collectively promote the benefits of the tax regime.
Hibernia REIT will seek to capitalise on the nascent recovery in Irish capital values, as well as in the value creation opportunities for secondary properties, particularly offices, which have been starved of capex since the global financial crisis.
Irish commercial property asset values collapse by two-thirds, or 67%, over the six-year period to the second quarter, according to Jones Lang LaSalle, with the first quarter of capital appreciation recorded just last quarter, at 1.1% on an all-property basis.
This was led by the office market, which grew by 1.7%, followed by retail and industrial, which increased by 0.6% and 0.5% respectively.
Hibernia REIT has identified a raft of expected sources of stock from which to acquire its initial investment portfolio, including: NAMA, the three major domestic Irish banks, as well as RBS’ Ulster Bank, Lloyds Banking Group and Danske Bank.
In addition, piecemeal and individual sales by private equity funds, sales by receivers and sale-and-leaseback transactions by large corporations and government entities.
Credit Suisse and Goodbody Stockbrokers are as joint bookrunners for the UK and Irish admissions respectively.