In the commercial property sector, Green REIT (OTCMKTS:GREEF) (LON:GRN) (Real Estate Investment Trust) was one of the big recovery stories of 2013 and that looks set to continue this year. Led by Stephen Vernon and Pat Gunne, shares in Green REIT floated at €1 last July and following a string of property purchases still look attractive at €1.40. There’s a distinct shortage of office space in Dublin right now and if the Irish economy continues to improve, rental growth will accelerate too.
Have they or haven’t they?
Several sources are reporting that the company has been successful in edging out The Blackstone Group L.P. (NYSE:BX) to acquire the sought-after Central Park development in Leopardstown, Dublin. Green REIT (OTCMKTS:GREEF) (LON:GRN) refused to comment on media speculation, but did confirm that the firm “had been selected as a preferred bidder by the National Asset Management Agency (NAMA) regarding the potential acquisition of a portfolio of commercial real estate assets, known as Central Park”.
A spokesperson warned:
“There can be no certainty any transaction will occur.”
Nevertheless, ValueWalk has received information that Green REIT (OTCMKTS:GREEF) (LON:GRN) has partnered with Kennedy Wilson to offer €310 million for the development, previously valued by NAMA at €250 million. The project covers five office blocks, a retail building and a family apartment block with 272 units. Total income for Central Park is currently estimated at €17.98 million a year.
Green REIT on a shopping spree
This comes on the back of an deal with Danske Bank A/S (CPH:DANSKE) (OTCMKTS:DNSKY) over one of its Irish property portfolios, consisting of 12 projects worth €135 million and a follow up, off-market, deal for four properties in Molesworth Street, a prestigious Georgian area of Dublin. One of these properties is set to be the headquarters for a major Irish estate agency, which has agreed to pay €236 per square meter.
Green REIT (OTCMKTS:GREEF) (LON:GRN) also paid €50.7m for Independent News And Media Public Ltd Co (LON:INM) (OTCMKTS:INNZF)’s print works in Citywest outside Dublin and the EBS HQ in Dublin. The sum of these recent acquisitions should see a yield in excess of 8.5%
Chairman Stephen Vernon said:
“It presents the opportunity to drive rental income and enhance capital value through active asset management. This transaction confirms that liquidity in the market has risen dramatically, as we had expected.”
He’s right, too. The Dublin property market is clearly in the ascendancy, reversing losses made last year, and shows no sign of slowing.
As for the future, he said:
“Our acquired portfolio is consistent with our stated strategy and we look forward to investing further in the Irish commercial property market and delivering attractive returns for our shareholders.”
All good for investors
He’ll need more cash to do that. The Central Park development will exhaust the equity raised in Green REIT (OTCMKTS:GREEF) (LON:GRN)’s listing in Dublin and London. So it comes as no surprise that market sources are reporting that the group has plans to raise up to €300m in fresh equity. Flor O’Donoghue, an analyst at Davy, said:
“It will consider raising debt and there is a good chance it will look at raising fresh equity. There is a strong appetite for the commercial real estate recovery story.”
There’s a lot of confidence in Vernon considering his track record. Under Vernon’s leadership, Green Property plc’s market capitalization grew from €24m in 1993 to around €1bn in 2002. US asset manger, Franklin Templeton, upped its stake in Green REIT (OTCMKTS:GREEF) (LON:GRN) to 14% just before Christmas. Billionaire, John Paulson, is also a major stakeholder.
Under company rules, at least 85% of the income from property rentals has to be directed back to shareholders with the first dividend becoming due in March 2015. Clearly, this will give the stock added impetus throughout 2014. Now looks like a good time to get involved.