It’s not surprising that Ires Reit has come under fire from an unhappy shareholder. What’s surprising is that it’s taken so long for someone to publicise their criticisms.
he company, which is Ireland’s largest private landlord with nearly 4,000 apartments, has struggled to grow its earnings despite record high rents and unprecedented demand in one of the world’s hottest residential real estate markets.
Consequently, its share price has languished for more than a year and under CEO Margaret Sweeney has now fallen below its IPO price, which makes it costly for original investors to escape by simply selling up.
Now Vision Capital, a Canadian investment fund that specialises in Reits, has decided it’s had enough. It wants a sale to a private buyer to realise what it sees as untapped value in Ires’s portfolio of mainly Dublin properties.
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“It’s clear Ires Reit has been a failure as a public company,” Jeffrey Olin, Vision’s president and CEO, told the Irish Independent. “We have no issue with the assets and Ireland is the best market from a supply and demand perspective globally. It just doesn’t work as currently structured.”
Olin pointed out several problems with the way Ires has operated that he says were not obvious in 2014, when Vision joined CapReit and other ground floor investors to support Ires in its debut on the Irish Stock Exchange.
“In 2014, we didn’t know there wouldn’t be great liquidity or that it would be hard to raise new equity or that there would be so many changes to regulations,” he said.
Olin pointed out several problems with the way Ires has operated
In short, Ires is a thinly traded stock, which makes it hard for shareholders to crystallise gains. The lack of a deep pool of equity investors means raising capital for growth by issuing new shares is next to impossible. The trust’s own leverage limits effectively prohibit further borrowing. Finally, changes imposed by new rules around rent pressure zones have stifled income growth, too.
The obvious solution is a private take out, like those seen with Green Reit, Hibernia Reit and Yew Grove Reit, which all delisted after single buyers came in. Shareholders got their premium, which is what Vision seems to be looking for.
“The other Reits had boards who were more aligned with shareholders,” said Olin. “The Ires board clearly is not.”
Other shareholders seem to agree. Ires shares closed nearly 4pc higher, signalling some level of support for Vision’s position.
“Irish Reits were a nice concept, they just didn’t work. It’s been a failure on all fronts. The quality of the assets is just not being recognised in the price.”