Irish Reit funds in 2013?

[bovis]

Hi. There were a lot of press articles at the start of the year about Irish REITs. Since then I have not heard of any funds launching. Does anyone know if there are any Irish Reit funds due to launch in 2013 under the newly introduced Irish legislation?
thanks

 

[mercman]

I believe that Joe Public have suffered such massive losses in relation to Irish Property, there is very little appetite to invest in an Irish Reit. Personally, the amount of casualties in the Irish Property market is so vast and not yet nearly completed, the entire Irish Property Market isn't a story, it's a nightmare.

 

[bovis]

Thanks mercman for the useful commentary but it didn't answer the specific question.

Anyone know if Irish REIT funds are coming on the horizon?

 

[Rory Gillen]

I can't say for sure but I understand one of the overseas investors which have been buying Irish commercial and residential property may look to package it into a vehicle suitable for listing onto the Irish Stock Market. We have no REIT on the Irish market and it would be a welcome addition in my view.

We all know Irish property has been a dreadful investment, but there is no point looking in the rear view mirror. I recall listening to a few middle aged guys the other week saying they'd never invest in the stock market again - someone should have told them the US Stock Market doubled in the last five years.

We need to assess Irish property today in a dispassionate manner for the potential returns on offer going forward. I'll be publishing a report on the Irish Commercial Property Market in the next few weeks and a copy will be available (at a cost) at info@gillenmarkets.com. I will alert Brendan here at Askaboutmoney.

My analysis suggests Irish Commercial Property has not just bottomed but looks capable of sustaining a recovery despite likely supply from NAMA. The market is priced to deliver decent high single-digit annual returns over the medium-term from here. We don't know the future but we can judge value and a margin of safety. There are several Irish property funds (not listed) that appear to offer excellent potential.

Rory Gillen
Founder
GillenMarkets.com

 

[Gary]

New REIT

Yes, Green REIT Plc an Irish property investment company, is apparently seeking a primary listing on the ISE and also a listing in London. I believe this will be the first Irish REIT. It is seeking to raise in excess of €200 million. 18 July shares expected to begin trading.

 

[Jim2007]

I can't say for sure but I understand one of the overseas investors which have been buying Irish commercial and residential property may look to package it into a vehicle suitable for listing onto the Irish Stock Market. We have no REIT on the Irish market and it would be a welcome addition in my view.

Gee, if it was such a great idea, why do 'the boys' want to pass it on to the general public... Any Irish REIT would be highly concentrated in a minor European economy and as such would not be suitable for most investors seeking to build a broadly diversified portfolio.

I recall listening to a few middle aged guys the other week saying they'd never invest in the stock market again - someone should have told them the US Stock Market doubled in the last five years.

If these gentlemen were referring to investing in Irish stocks, then their conclusions are not as far of the mark as you are suggesting! There is a world of a difference between investing in say the S&P 500 and investing in the Irish stock exchange!

The market is priced to deliver decent high single-digit annual returns over the medium-term from here. We don't know the future but we can judge value and a margin of safety. There are several Irish property funds (not listed) that appear to offer excellent potential.

Is there a functioning market? I really don't think so. Given the amount of property being held back and the difficulties in funding, I find it hard to see how any conclusions on the Irish market can be anything be but speculative...

 

[dub_nerd]

Yes, Green REIT Plc an Irish property investment company, is apparently seeking a primary listing on the ISE and also a listing in London. I believe this will be the first Irish REIT. It is seeking to raise in excess of €200 million. 18 July shares expected to begin trading.

Sorry for a naïve noob question -- to invest in a REIT, do you just buy their shares on the stock market like any other share? Is the tax treatment the same as any other stock?

 

[ALBERT*]

I believe that Joe Public have suffered such massive losses in relation to Irish Property, there is very little appetite to invest in an Irish Reit. Personally, the amount of casualties in the Irish Property market is so vast and not yet nearly completed, the entire Irish Property Market isn't a story, it's a nightmare.

Seems like you are outlining the perfect scenario for high prospective yields.

 

[MrEarl]

Hello,

Question - why would NAMA not create a couple of these funds and list them, to help recover some funds for the State by selling shares in REITS ?

Answer - Because if they did, it would immediately result in the crystalisation of massive losses as properties were transferred into the REITS (i.e. current value of various properties -vs- what NAMA "paid" for them when they were taken of the Bank's Balance Sheets) and also, possibly prevent NAMA from continuing to evolve into a (indirectly) State owned property holding company providing secure jobs for life perhaps ?

Regards

Mr. Earl.

 

[LDFerguson]

Green REIT plc

Davy are looking for orders in the new Green REIT plc by 5th July. See here. Minimum order is €100,000 but as it's an IPO, there's no guarantee that anyone will get €100,000 worth of shares.

I'm surprised that the minimum order is being set at €100,000 as that will exclude a lot of small investors. This is despite what the Department of Finance said about REITs after the Budget announcement.

Small investors can gain access to returns from high-quality investment-grade property assets, which have previously been the preserve of very large investors only.

Perhaps I have an outdated concept of what's a small investor these days?

 

[mercman]

Perhaps I have an outdated concept of what's a small investor these days?

It does appear that the Department of Finance have a similar perception.

There are more secure REITs available in the US or the UK. Saying all this, I would say the Green Reit would be pretty decent allowing for the fact that the Management have a decent and most important, an honest track record.

 

[dub_nerd]

Just bumping this thread to see if someone can answer my question: how do you buy a REIT? Do you just buy its shares on the stock market like any other share? I gather from Googling elsewhere that the tax treatment is like any other share.

 

[LDFerguson]

Just bumping this thread to see if someone can answer my question: how do you buy a REIT? Do you just buy its shares on the stock market like any other share? I gather from Googling elsewhere that the tax treatment is like any other share.

Yes you buy shares like any other. The only Irish one as far as I know is the Green one mentioned above. If you want to buy shares in it from the start, you have to order €100,000 worth and then see how many you actually get. Or you can wait until after the IPO and buy them on the market at whatever price they're trading at.

There are other ways of investing in REITs from other countries. For example, Standard Life have a global REIT fund. You invest in the fund through a Standard Life product; the fund invests in a variety of global REITs. Or you can buy REIT ETFs which operate along broadly similar lines. Plus point: you get exposure to a variety of REITs at once; minus point: all the third parties have to be paid.

 

[Jim2007]

Plus point: you get exposure to a variety of REITs at once; minus point: all the third parties have to be paid.

Apart from the usual brokerage fees & taxes on the acquisition of the ETF holding, what other third party fees are you referring to?

 

[LDFerguson]

Apart from the usual brokerage fees & taxes on the acquisition of the ETF holding, what other third party fees are you referring to?

I was comparing buying a share in a REIT directly with investing via a pooled fund. With a pooled fund, including an ETF, the fund operator will take their cut - typically an annual percentage.

 

[mercman]

In any of these funds, the main certain winners are the Fund Managers along with the cohort of levels of Management. ETFs normally have lower funds, but a proven point are the standard index linked funds or unit trusts which are full of fees and charges, (commonly classed as the Total Expense Ratio).

 

[Rory Gillen]

In my view, the Irish commercial property market is turning and the three factors that drive positive, and healthy, long-term returns are now in place, namely; positive growth in rents, which is evident in the prime Dublin office market at least, a high initial rental yield and affordable interest rates. In addition, for overseas investors, thanks to the ECB, there is now access to long-term funding while also being able to hedge the (Irish) Euro risk. So there are plenty of overseas buyers in the market place.

Despite the traumas in the past few years in Irish property, value in Irish commercial property is excellent and the introduction of the Stephen Vernon (Green Property) led REIT should be very interesting. There are, of course, at least 3 unit-linked funds from the life companies that offer direct exposure to the Irish commercial property market and all three are worthy of consideration.

But a REIT, which is in effect an investment trust, is the best fund vehicle in my view. You can buy and sell shares in it like you might any other company. Costs are lower in the stock exchange system, and counterparty risk is the lowest of all fund types. If you don't have access to the shares prior to listing then you can buy in the secondary market although, initially at least, you may have to pay a premium. I'd expect the REIT to offer a high initial dividend yield. The average rental yield on prime Irish commercial property is currently 6.9% so a dividend of around 5% from this REIT is possible.

Rory Gillen
Founder. GillenMarkets.com

 

[Rory Gillen]

xx

 

[Rory Gillen]

Gee, if it was such a great idea, why do 'the boys' want to pass it on to the general public... Any Irish REIT would be highly concentrated in a minor European economy and as such would not be suitable for most investors seeking to build a broadly diversified portfolio.



If these gentlemen were referring to investing in Irish stocks, then their conclusions are not as far of the mark as you are suggesting! There is a world of a difference between investing in say the S&P 500 and investing in the Irish stock exchange!



Is there a functioning market? I really don't think so. Given the amount of property being held back and the difficulties in funding, I find it hard to see how any conclusions on the Irish market can be anything be but speculative...

Yes, perhaps my point on the S&P 500 was a little trite. The ISEQ Index remains 60% down from its peak and there are two lessons investors can learn from this experience;

(i) That concentrating on a small peripheral market is not necessary and that geographic diversification makes sense (and is easy to achieve, in the stock market at least).

(ii) That the ISEQ suffered above average losses due to the fact that the banks went bust

This latter point highlights that if an individual wishes to invest in individual companies he/she must be able to distinguish between temporary declines in prices (which is normal in a recession) and the threat of a permanent loss. In 2008, the threat to the Irish banks was insolvency and to investors a permanent loss.

Many Irish companies have recovered fully and more - Kerry, Ryanair, Glanbia etc. Although they, too, suffered in 2008 they did not contain the risks of a permanent loss. In my own book (Chapter 8), I argue that most private investors cannot make this critical distinction - between temporary declines in prices and the threat of a permanent loss - and for that reason they are far better off investing in risk assets through funds.

Unless you can identify and understand the three risks in businesses, then how can you ever see the risk of a permanent loss coming? Those three risks are;

(i) The business risks
(ii) The financial risks
(iii) The valuation risks.

Indeed, vanity and egos play their part. Most private investors should not expect of themselves to be able to determine risk, and therefore my own conclusion that most private investors are better off in funds. I do believe this is any admission of failure. Rather, it is to recognise that if we are to benefit from the superior returns on offer over the long-term from equities or property we must survive the downturns and we can better do that if we control the risks.

In physical property, the error Irish investors made was using debt (financial risk) to buy an overvalued asset (valuation risk).

Rory Gillen
Founder, GillenMarkets.com