IPUT, Ireland’s largest unleveraged indirect commercial real estate fund, has recruited former NAMA director John Mulcahy as part of a strategy to deepen its global investor base as it seeks to capitalise on Dublin’s enduring competitive prime office income yields.
Mulcahy, who joins as a non-executive director of the board of IPUT plc in mid-July, will have a remit to attract and retain international fund investors, following the fund’s conversion to an internally-managed Qualifying Investor Alternative Investment Fund (QIAIF) back in January which opened the fund up to a potential global investor base.
In a prepared statement, Frank Close, chairman of IPUT, said of Mulcahy’s appointment: “I believe John’s wealth of knowledge and experience of commercial property will significantly contribute to IPUT’s continued evolution, and will assist us in enhancing the growth and value of the company in the interests of our shareholders.”
IPUT is understood to have already gained traction in diversifying its investor base outside its domestic market, including Aviva, through its £254.6m Aviva Investors European Property fund, and US pension fund clients of CBRE Global Investors.
Over the past 18 months, IPUT has committed over €400m in investor capital to the improving Dublin office sector and reported total returns for the 12 months to March 2014 of over 21%. IPUT is near to the closure of a number of off-market transactions – currently in legals – which will be funded with capital commitments drawndown at the turn of July which should increase the fund’s value to €1.1bn.
In addition, CoStar News understands that the a series of German funds are also in discussions to invest in the IPUT fund including Allianz, Union and AFFIA, which could see the fund grow to €1.3bn by October.
Future growth of IPUT is expected to be broadly correlated to the maintenance of Dublin central business district (CBD) office income yields at current levels, within the 6% range.
IPUT is one of the largest owners of prime office property in Dublin’s central business district (CBD) with a portfolio of 30 properties over 1.3m sq ft valued at €660m. All told, IPUT owns 79 commercial properties with a total annual rent of €70m and is currently paying a quarterly income dividend of circa 6.5%.
Income yields key to peer group competitiveness
In the last 12 months, rising capital values, notably in Dublin’s central business district, driven by international capital from investors such as Kennedy Wilson Europe, Lone Star Funds and Blackstone has eroded income yields from earlier highs of mid 7s.
The question mark over the evolution of Dublin’s property market recovery from here is to what extent the continued weight of capital chasing stock will reduce the competitiveness of the Dublin commercial property market, relative to both its European tier two city peers as well as in comparison to future improvements in bond yields.
The market consensus seems to imply that there is still further road ahead before such concerns are realised.
For Dublin offices, the rental growth story remains supported by the dearth of new supply, with the severity of the global financial crisis in Ireland such that there has not been a crane in the sky in the city from 2007 until the turn of this year.