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Housing Fund Wants To Raise €400M To Invest In Rental Sector

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Urbeo Residential Chief Executive Felix McKenna

Urbeo Residential has announced its plans to raise between €300M and €400M to invest in the private rented accommodation sector.

Goodbody and Deutsche Bank have been appointed by the company to advise on the fund raising, which will target long-term institutional investors. 

It is proposed that the Ireland Strategic Investment Fund, an €8B Irish Government-owned fund that invests with a long-term time horizon on a commercial basis, will be an anchor investor in the planned scaling up of the fund, with capacity to commit up to €100M on a co-investment basis

The mixed-tenure housing fund aims to provide accommodation for low and middle-income households — mainly in Dublin but also in other cities throughout the country.

Urbeo’s model is focused on matching investor and tenant needs for long-term stable returns by building mixed communities of rental housing, including social and affordable housing. The fund is targeting a stabilised dividend yield of 4.5% to 5% and levered internal rate of return of 8% to 10%.

Urbeo will seek to partner with builders, developers and housing associations to deliver new rental housing projects in non-prime but well-serviced locations.

The fund said its pilot scheme, the 131-unit New Bancroft development in Tallaght, acquired last July for €33M and backed by the ISIF, is now fully let. 

Urbeo has also signed an agreement with Glenveagh Living, a subsidiary of Glenveagh Properties.

As part of the agreement, both companies have committed to work together on the sourcing, acquisition and development of residential communities, with Urbeo acting as a potential buyer of Glenveagh-built developments.

"We believe there is a clear gap in the market to provide a quality rental housing option to low and middle-income households," Urbeo Chief Executive Felix McKenna said.

"Our aim is to create balanced and sustainable communities where the long-term stable tenant base is aligned with the requirements of investors for steady, secure income," he added.

McKenna said that the residential rental sector has become an increasingly important asset class in recent years because it can provide a reliable income stream and diversification from other real estate asset classes. 

"We are providing the first opportunity to invest in scale in European-style rental developments in Ireland, the type of which are long overdue in a market that has seen extremely rapid increases in residential rents in recent years," he added.