Ires Reit is best known for its huge, nearly 4,000-strong portfolio of mainly high-end buy-to-rent apartments and houses where average rents in 2023 were €1,774 per month.
However, recently appointed Ires Reit CEO Eddie Byrne on Thursday that further investment in stock to supply the private rented sector is currently unattractive to investors despite soaring demand.
Instead, options being explored by Ires include participation in the State-supported Secure Tenancy Affordable Rental Investment Scheme (STAR).
Under that scheme, landlords can secure as much as €200,000 of interest-free funding from the State to invest in new affordable rental units, where the rents are capped at 75pc of prevailing market levels.
Mr Byrne said certain technical aspects of the scheme are currently unattractive, but he believes those details can be resolved.
“We believe there is a big opportunity in the affordable space,” he said.
Ires Reit can deploy both capital and its skills as an asset manager in the affordable segment, he said.
Ires Reit’s core private rented sector is challenging with investors unwilling to put fresh capital into new stock, he said.
He blamed Ireland’s rent caps regime as the main impediment to institutional investment, saying the regulations mean income from apartments is restricted while costs are rising. Ires is lobbying policymakers to loosen the rent caps, he said.
Rent increases for tenants to 2pc a year since the end of 2021. Before that, hikes were capped at 4pc.
Mr Byrne said more investor-friendly rent regimes elsewhere in Europe allow landlords to impose bigger hikes on new tenants or to claw back capital invested in property upgrades. In some jurisdictions there are dual rental regimes with some units rent capped and others subject to market rates to encourage new supply, he said.
He was commenting after the Ires Reit board said a strategic review initiated after pressure from unhappy shareholders had produced no bids for the business as a whole and that directors had unanimously concluded “following rigorous market testing” that a sale or liquidation was highly unlikely to deliver value.
The company owns and manages almost 4,000 rental units in Ireland so a sale or break up would have been a major event. Its shareprice persistently lags well below the market value of its stock of housing.
The company instead said it has identified 315 units suitable for what it calls an asset-recycling programme – a sales process – expected to generate proceeds of between €110m and €115m over three to five years with funds used to buy new stock. Units in need of upgrade or in developments not fully owned by Ires will be the focus of the sales
In financial results for the first half of 2024, Ires Reit reported like-for-like revenue growth of 2.1pc, driven by both organic rental growth across the existing portfolio and enhanced ancillary revenue generation.
Revenue for the period of €42.8m was down versus the year before following the earlier sale of some units. The occupancy rate of its portfolio at the end of June was 99.6pc reflecting the exceptional levels of demand for homes to rent.
The company also reported the conclusion of its Board Strategic Review carried out under chair Hugh Scott-Barrett.
In a statement in January, the board announced that a review would take place to consider a “full range of strategic options” to maximise value for shareholders.
The results of the review are not a surprise but will disappoint a shareholder group who had been gunning for a strategy to deliver a big immediate or near-term windfall.
Shares were down sharply on Thursday after the results, falling more than 2pc. It was the worst-performing stock in the Iseq index of leading Irish shares.