IRES plans asset sales in bid to stem losses

Irish Residential Properties REIT intends to sell about 8% of its portfolio over the next five years as it continues to generate losses. The REIT’s portfolio had a total value of €1.2bn (£1.1bn) at the end of June, slightly lower than €1.3bn at the end of 2023, hurt by 0.2% EPRA net initial yield expansion to 5.1%. This yield expansion resulted in a non-cash fair value revaluation adjustment of €32.5m and a pretax loss for the six months to 30 June of €20.3m, narrowed significantly from £42.1m the prior year. IFRS NAV per share totalled 126.4 cents versus 131.7 cents as at 31 December last year. Revenue from investment properties decreased to €42.8m from €44.3m year-on-year, while net rental income grew slightly to €32.7m from €34.3m. The REIT has also concluded its strategic review, launched in February this year, concluding that a sale of the company or its assets is unlikely to maximise shareholder value. No proposals were received to acquire the REIT during the course of the review. Going forward, and in order to drive value for shareholders in the medium term, the REIT intends to execute a selective capital recycling programme, including the disposal of 315 homes, which is expected to generate between €110m and €115m of proceeds over a three-to-five-year period. The sale would represent about 8% of the total portfolio and 23% of the company’s market capitalisation. Elsewhere, the REIT is keen to explore opportunities to partner with Irish government bodies to deliver new supply to the affordable housing market. The company will also work towards optimising its cost structure to maximise net rental income margin and adjusted EBITDA margin. On an overall basis, net rental income margin was 76.5% in the first six months of 2024 compared with 77.3% for full-year 2023 and 77.5% for H1 2023. Chief executive Eddie Byrne said: “While overall we believe the outlook is positive, the current Irish rental regulatory structure remains the single most inhibiting factor for our business. The 2% cap on rental increases has had a profound impact on the supply of new build-to-let properties in the market and is an impediment to critical international investment. “Looking ahead, we will focus on implementing the operational initiatives identified by the strategic review which will help to optimise our portfolio, drive value maximisation for shareholders, and improve our financial performance over the medium-term.”