Update 29 Jan 2020: Irish property funds under pressure as investors rush for the exit. Read Moneycube’s view
There’s no getting away from Irish people’s love of property investment.
Now buying a house to live in might be increasingly difficult. But commercial property investment funds offer you a bite-sized way to get financial exposure to Ireland’s recovering real estate scene. We survey your options.
Our favourite fund
Judging the top performer is no easy task. Property valuations by their nature can jump around. And needless to say, the price moves over the last ten years have been extreme. Property is a long-term game.
At Moneycube our favourite is Friends First’s Irish property fund. The fund only invests in direct purchases of Irish retail, office and industrial buildings.
Almost half the portfolio is retail space. In Dublin for example, Friends First’s fund owns 3 shops on St Stephen’s Green, and the Royal Hibernian Way and Blackrock shopping centres – both of which it’s in the process of redeveloping.
It owns property on Patrick Street in Cork, as well as retail parks in Naas and Kilkenny.
7.4% sounds good
With 39 properties in total, and a fund size of €477 million, the fund is large enough to be diversified, and small enough for properties to receive some real management attention.
Friends First also has a long track record running this fund. Since its launch in 1984, the fund has generated an annualised return of 7.4%.
Show me the money
Like many Irish property funds, Friends First has had a great performance in the last five years. It grew 12.25% per year on average, as it recovered from the depths of recession.
Now, however, its managers expect returns to come from rental income more than property price growth. Asset price growth has dampened a little, and the fund has locked in some decent lease terms.
With a worst-case average lease term of more than 8 years, Friends First are well positioned to collect solid rental income on this portfolio.
What else is out there?
Other options from life assurance companies come from Aviva and Irish Life.
Aviva’s fund, run by a UK team, posts even higher returns than Friends First, at 14.1%. However, this is before management charges, and the fund has a shorter track record. Nonetheless it owns a solid portfolio of commercial space (mainly office and retail) such as the & Other Stories building on Dublin’s Grafton Street.
The big beast is Irish Life. On the go since 2001, and €777 million in size, this fund contains 53 properties. Its emphasis is on office property investment, particularly around Dublin’s IFSC, where it owns 1 Harbourmaster Place.
36% of the portfolio is in retail, including Swords’ Pavilions shopping centre and the ILAC shopping centre. (ILAC actually stands for Irish Life Assurance Company).
But with an annual management charge of 1.75%, and only a 3.1% return since 2004, Irish Life’s property fund is a tougher sell.
Reits could be right for you
The introduction of real estate investment trusts, known as Reits, is a newer development in the Irish market. Reits are stock market listed businesses. That means you invest via a stockbroker, rather than using the services of an investment advisor such as Moneycube.
Being listed investments also exposes these businesses to the fluctuations any that affect any single listed company, as Rory Gillen has explained very clearly.
The two most prominent Reits are Hibernia Reit and Green Reit. Both have grown quickly to manage property portfolios of over €1 billion.
Hibernia is focused on office space in central Dublin, where it has developed buildings like Windmill Lane on the quays, as well as parts of the IFSC.
Green Reit has 20 properties, and looks a little farther afield, developing complexes such as Central Park in Sandyford (not much farther afield admittedly…)
Building on the Reit offering, Zurich Life have launched a property fund which holds both Hibernia and Green Reit. This offers investors whose money is already in a Zurich life assurance wrapper, or a pension, a way to gain exposure to Irish commercial property.
Since its launch 3 years ago, Zurich’s fund has delivered annualised growth of 6.9%.
Interested? Time to talk
Commercial property funds have mostly recovered from the deep losses recorded through the economic downturn, and posted some strong returns.
Talk to Moneycube today about placing your money in commercial property investment funds.
