Yew Grove REIT upbeat on Irish economy – Irish REIT Yew Grove (YEW) published its first annual report this morning following its inauguration, covering the period from April to December-end 2018. We wrote about the headline numbers from this period they were first released in February 2019. Click here to read more on this story.
With that in mind, the focus here is on YEW’s activity over the first calendar month of this year.
2019 portfolio developments
- On 8 February 2019 the company reached a deal to purchase an office block located in the IDA waterford business and technology park, Butlerstown, Waterford for €4m plus costs, representing a gross yield to fair value of 8.56% after accounting for all purchase costs. The property, 36,845 sq. ft. of open plan office space arranged over three storeys and is tenanted by Tech Mahindra Business Services Ltd under a 20 years lease with a break in five years, and SE2 Information Services Ireland Ltd under a five years lease.
- On 27 February 2019 the company completed the purchase of Unit 2600, Cork Airport Business Park, Cork Airport for €7.5m plus costs, representing a gross yield at fair value of 7.85% after accounting for purchase costs. The property, a two storey, 40,953 sq. ft office block which was refurbished in 2015 and includes a 163-space car park, is tenanted by Clearstream Global Securities Services Ltd, a subsidiary of Deutsche Borse AG, under a 25-year lease with final expiry in just over five years’ time.
Discussing 2018 and offering some guidance on their outlook for the rest of 2019, Yew CEO Jonathan Laredo, said the following: “The strength and depth of the company’s potential acquisition pipeline is a reflection of the positive Irish commercial real estate market, as well as the company’s first mover advantage as the only publicly quoted vehicle focusing predominantly outside of the Dublin central business district (“CBD”). The Irish economy has performed strongly in recent years and this has been reflected by the volume of property investment transactions. 2018 was one of the strongest years on record with total transactions of €3.6bn. More significantly for the company, approximately 67% of those transactions happened outside of the Dublin CBD (Source: cushman and wakefield ), i.e. within the company’s geographic target market. The prognosis for the economy remains positive despite underlying concerns relating to Brexit and other macro-economic headwinds.
On current trends, demand for office space is increasingly being driven by the requirement from multinationals for large footplate, Grade A or modern space. In addition, the Irish government has a proactive policy focused on balanced regional development which is encouraging the growth of regional FDI centres. With current rent rates for prime space outside of the CBD at half of the CBD levels or lower, multinationals and other tenants attracted by suitable space are driving demand and falling vacancy rates. For the past 3 years take up has been stronger in Dublin’s secondary and suburban areas than in the CBD, and in 2018 vacancy rates in those locations fell, whilst vacancy increased in the CBD (principally in older, poorer quality buildings). Vacancy rates have fallen in Cork, Limerick, Galway and the other key cities and towns in which large corporate FDI companies are increasingly looking to site their businesses. Rising rents have seen the beginnings of development outside of the CBD, with over half a million square feet under construction (Source: cushman and wakefield).
Transactions in industrial property are fewer as a severe shortage of suitable properties makes secondary transactions expensive and relatively infrequent. This market accounted for only 3% of all commercial real estate investment transactions in the first 3 quarters of 2018 (Source: cushman and wakefield). However, the demand for space is driving rents upwards and there are increasing numbers of forward funded developments for tenants. The company expects to see that continue in 2019 and beyond.”
About YEW
YEW is an Irish REIT investing in office and industrial properties primarily outside Dublin’s central business district. Its shares are listed on AIM and on the Enterprise Securities Market of Euronext Dublin. The directors intend to build a portfolio of properties which is focused on commercial real estate assets in Ireland, with a particular focus on office and industrial assets let to Irish government entities and other State Bodies, IDA Ireland supported and other FDI companies, and larger corporates.
YEW: Yew Grove REIT upbeat on Irish economy