One would imagine that such a company would be a money-making machine and investors would be falling over each other to buy shares in it.

Not so. The company is Ires Reit and this week it had to defend itself from criticism by one shareholder who believes it should put itself up for sale, as a way of maximising returns for investors.

Ires Reit is a little perplexing given its portfolio of properties. Its 3,938 homes have an occupancy of 99.4pc and have been valued at €1.5bn. With its shares trading at €1.07, its market capitalisation is just €598m.

Taking into account the €650m in borrowings it has, in theory, it should be able to bag about €850m if it sold all the properties after paying down its debts. Yet the market values it at €252m less than that.

Canadian investment fund Vision Capital has thrown a real spotlight on the performance of the company by suggesting that it should put itself up for sale. This has been rejected by the board which says the share price greatly undervalues its real potential.

Nevertheless, the attention has put the Ires board on the back foot. Even if a ‘for sale’ sign isn’t the best option right now, it has to be seen to do something in response to some very legitimate questions about valuation. 

As a bit of a sweetener to shareholders, Ires has identified €100m worth of non-core assets which it plans to sell off in the short term and return excess capital to shareholders. What does “non-core” mean when all you do is own and rent homes? 

This is a very tricky issue for the board. Right now does not look like the best time to sell a property company, even if its asset base should be very attractive. 

Interest rates are rising, which would reduce the price at which any takeover bid would be priced. There is uncertainty in international markets which has affected the private equity and commercial property sectors leaving them a lot more cautious about debt-funded takeovers.

Similarly, if there had been a credible approach from a buyer, the board would have had to announce it and engage. It doesn’t look like there is a buyer despite the fact that the shares are trading at levels which value the company at €252m below the net value of the houses it owns.

This is clearly not the optimum time to put the company up for sale.

But investors might have to wait a long time before the optimum time arrives. What is going to happen in the Irish rental housing market that will make everything so much better at Ires and a more attractive proposition for investors?

That isn’t clear. Occupancy is at the ceiling. House prices are close to the ceiling. Rents are at record levels. If anything, house price valuations could dip. Ires’s interest bill on borrowings rose by 21pc last year to €16.8m. Rates are expected to increase further.

Regulation of the rental market by way of rent freezes and other restrictions is likely to get tougher rather than easier. This might not be the best time to sell, but it might not be the worst either.

The company has insulated itself from further interest rate hikes by fixing 72pc of its debt until 2026.

Rents don’t look like falling any time soon so its rental income is practically guaranteed. Last year its average rent per property was €1,750 per month. That is equal to €21,000 per year, and at a yield of around 5.5pc, values the average property at €382,000.

Average rents rose in 2022 and it generated a rental income of €65.7m.

It isn’t unusual for quoted property company shares to trade at below their net asset value, but in this case the discount is substantial. The shares are down 28pc in the last year and down 38pc in the last five years.

It isn’t that clear how the board will improve on that massive gap between its market value and the value of its assets.

Stephen Vernon and Pat Gunne’s Green Reit makes for an interesting comparison. It decided to put itself up for sale early in 2019. The reason given was the fact its stock had been trading at a big discount to asset values for some time. The shares were trading at €1.60 when it had a net asset value of €1.83.

Green Reit was a commercial property play with sizeable interests in offices and logistics. It was bought for €1.34bn by investment fund Henderson Park a few months later.

Vernon’s timing was interesting. Commercial property was on fire. Interest rates were low and deals could be financed very cheaply. The appetite for commercial property was huge and the sector had a strong wind at its back.

There were lots of good reasons to stick it out but Vernon decided this was the best time to go. As it turned out, Green Reit was sold just months before Covid arrived, before the arrival of remote and hybrid working with its impact on office valuations and before the interest rate cycle turned in 2022.

Unlike Green Reit, Ires is in the business of providing rented homes. Green stayed on the stock market for just six years. Ires should be a stable long-term provider of affordable, high-quality homes, while delivering a decent but not necessarily sky-rocketing return to investors.

The problem is that the Ires share price was heading further downward this week with broker Berenberg cutting its price target by 20pc to €1.00. This would put it all the way back to its initial offering price.

One option for management is to sell down some assets and return the proceeds to shareholders. This should keep some of them happy while also supporting the share price.

However, the more it sells, the more the company shrinks. Surely it wants to get bigger rather than smaller.

If the Ires board did opt for a sale process, who would be the likely buyers? The pockets of investment fund buyers are not as deep as they were given the higher cost of raising money.

One option might be a massive international landlord company. Those unhappy with the scale of Ires Reit in our residential rental market might see an Irish-managed firm with 4,000 Dublin properties, replaced by a giant like Deutsche Wohnen which owns 500,000 homes across Germany alone.

Lots for Ires Reit and its critics to think about.