With property investment opportunities in both Ireland and the UK now more difficult to come by, Irish high net worth individuals (HNWIs) are looking to the US market for more attractive returns. As the dollar continues to weaken against the euro, prime real estate in international cities like New York and Boston has become cheaper for Irish investors.
In the past few months Quinlan Private, Bank of Ireland Private Banking (BOIPB) and Sorrento Asset Management have all invested stateside, with BOIPB making its first foray into the US property market. It invested ?54.5 million on behalf of a small number of clients in a 312 unit multi-family complex in Massachusetts, north of Boston.
Peter Collins, property director of BOIPB told FINANCE, 'Over the last five years Irish private investment has moved from the UK and definitely in the last 24 months there has been a surge towards investing in the US. This is obviously linked to the perceived weakness of the dollar.'
'We have been looking to enter the US property market in the last 12 months,' he added, explaining that the multi-family option was chosen, 'because as an asset class it does well in rising interest rate markets'.
Quinlan Private purchased a townhouse in the upper east side of Manhattan for $18.7 million.
Sorrento recently transacted its third property investment in New York, a 35 floor apartment building which will consist of 110 residential apartments on 34th Street in the established Murray Hill area of Lower Manhattan. It is backing the development itself, and will be looking to sell on blocks of the property in the future.
Sorrento's CEO Bryan Turley feels that, in spite of an expected drop in the overall US property market, an opportunity in the heart of New York will not be affected by general market trends. 'The possible downturn in the US is going to be buffered slightly in places like Chicago, Boston and New York because they are international trophy cities in a sense. Because you don't know who is investing there - whether the money behind ventures is Indian, Chinese or European - there will be some level of insulation.'
'America is a real opportunity for HNWI investors at the moment. The situation with the dollar, and the cost of assets compared to Ireland mean that it makes great sense to invest there. There is a large amount of money floating around in Ireland looking to invest in property, and at the moment the US is a good option for investors. And, as we have seen with the ventures of Quinlan Private and Bank of Ireland it is absolutely a trend, and it is reassuring for Sorrento in that it proves our model to be viable,' said Turley.
However, there are some obstacles to investing in America. Obstacles that need to be overcome, as Turley explains, 'There is more paperwork involved in dealing with the US authorities, and the only thing I can say is: use good lawyers. We use DLA Piper, one of the biggest law firms in the world, and that makes it easier for us to do business.'
Both companies are expecting a net return of between four and five per cent, with Sorrento projecting a gross yield of around six per cent, and incurring costs of just over one per cent, while Bank of Ireland is projecting an initial yield of 5.3 per cent. |
