Donal O'Donovan: 'It got in on the bottom so Green Reit doesn't have to call the top to get out ahead of the market'
In 2013, veterans Stephen Vernon and Pat Gunne moved heaven and earth in their race to create Ireland’s first real estate investment trust (reit).
The reit was a means to an end. The important thing, they knew, was to have cash while commercial property prices were on the floor. With Green Reit now for sale, and Vernon and Gunne checking out, the question the market is asking is whether property prices have peaked.
Bosses at Green Reit insist the decision to sell now is not calling the top, but reflects frustration at the underperformance of the reit’s shares versus the price they’d get for its assets.
A gap between stock market valuation and assets isn’t unusual for property firms. Hibernia Reit recently sold a Dublin office block and used a chunk of the proceeds to buy back its own shares, for much the same reason.
With Green Reit shares valued at €1bn and its assets at €1.5bn the gap is enormous, and its thought the board did look at possible share buybacks as well as alternatives like shifting into new property segments before ultimately opting to sell.
Until a buyer is in place Green’s own bosses will run a mile from any suggestion the market has peaked. They can point to their own robust rent rolls and a roster of tenants that offers a mix of the well-heeled and the sticky that would appeal to any investor – including the Revenue Commissioners and the Department of Foreign Affairs on the one hand and Barclays, Vodafone, Bank of America Merrill Lynch, Ulster Bank and AIB on the other.
Shares shot up yesterday, so the market at least believes a deal will play out well.
And the reality is that Green Reit doesn’t have to call the top to be motivated to sell.
Having got in at the bottom six years ago there’s Green shareholders who have had the best of the recovery. The option to get out, even if it means leaving something on the table for a new investor, simply makes sense.
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