Just before Christmas the largest single apartment block deal ever to take place in Ireland happened when NAMA sold 442 apartments in Tallaght Cross West for €83 million.
The company they sold it to, Irish Residential Properties Real Estate Investment Trust (IRES REIT), is now the country’s largest residential landlord owning over 2,000 apartments in Dublin. Some of the top people working for IRES REIT have also worked for NAMA. As well as Tallaght Cross they have also acquired many other large apartment complexes across the city. In 2014 they bought 800 apartments off NAMA for €211m in what was called the “Orange Portfolio”. It consisted of units in Finglas, Drimnagh, Beacon South Quarter in Sandyford, and Bakers Yard. The fact they were sold off in one large portfolio put them beyond the reach of anyone but a company like IRES REIT with its access to capital and a €130m loan from Barclays Bank.
In spite of the company name IRES REIT is financially supported by Canadian Apartment Properties Real Estate Investment Trust (CAPREIT) which owns over 40,000 homes in Canada. Many of their Canadian tenants I spoke to say renters in Ireland should be very worried. I heard reports of CAPREIT bullying their tenants, many of whom are older people, of badly managed properties, negligence and extortionate rent hikes. I will get to that later. I also spoke with CAPREIT CEO David Ehrlich to get his side of the story. But first of all here is some background information on IRES REIT.
IRES REIT was set up in September 2013 and floated on the Dublin Stock Exchange in April 2014 when they raised €200 million with CAPREIT putting up €20 million of that for a 10% stake. In April 2014 a former NAMA adviser, Donal Kellegher, was hired as chief investment officer for IRES REIT. This wasn’t in any way a unique development as a large number of NAMA staff left to take up jobs in companies that are buying up Irish property. Kellegher, who has over 20 years experience as a chartered surveyor, worked for NAMA from May 2010 to March 2014 as Senior Property Advisor prior to his move to IRES. A statement on the company website at the time said: “His primary responsibility will be for the day-to-day development of IRES REIT’s residential rental portfolio in Ireland, including identifying opportunities and on-the-ground investment sourcing.” I think it would be safe to assume IRES REIT benefitted from Kellegher’s knowledge of having worked with NAMA.
Another ex NAMA employee who left to join IRES REIT is Charles Coyle. Currently the VP of Acquisitions at IRES he worked for NAMA for two years. From March 2011 to October 2013 he was Portfolio manager at the agency before spending a year (October 2013 to September 2014) as Senior Property Advisor. As per NAMA no rules were broken and there was no conflict of interest.
Speaking in 2013 at a Committee of Public Accounts debate NAMA chief executive Brendan McDonagh was asked whether staff leaving to work with companies investing in the Irish property market could be accused of a conflict of interest. Were they being hired because they could have insider information?
“They would not have been working for NAMA in the first place if they did not have the skills we needed…Very few people have access to information with a high level of detail. Having said that, people who are employed by the NTMA and assigned to NAMA are obliged to comply with the Official Secrets Acts. Their obligations under section 202 are of lifelong application – they are not confined to the duration of one’s work with NAMA.” he said.
“The reality is that people who work in NAMA have to give three months’ notice when they resign. We have the option of putting them on gardening leave for that period. The reality is that we cannot stop someone from making a living. If we think somebody is using information inappropriately, there are mechanisms to deal with that under the present legislation.”
ACQUISITION OF TALLAGHT CROSS
NAMA put Tallaght Cross up for public sale last October. The substantial development, which was built by Zoe Developments just before the property crash in 2008, includes three office blocks, a hotel and 442 apartments with ground floor retail space. It was the largest number of apartments to ever come on the market in a single development in Dublin.
In December IRES REIT bought Tallaght Cross for €83 million. Some people I spoke to thought the price was too low. Going on the rate of €200 per sq foot would mean the apartments were sold for just €100,000 each. At the same time the government was building modular homes in Ballymun at a cost of €190,000 in the midst of the worst housing crisis to hit the country.
Someone connected with one of the companies involved in the sale who wished to remain anonymous told me the real price was €180,000 per apartment. They said the €83 million just covered the 442 apartments and the three office blocks, hotel and ground floor retail space was included in the deal for free. “There has been some discrepancy of the actual price, I know that it was even discussed in the Dail,” he said. “To be honest with you it was all about the resi (residential). The commercial units were just included to seal the deal because their value would be no where near market value.” At the moment only 10% of the commercial units are occupied yielding rent of just over €600,000 per year but it still represents a hit to the tax payer and a substantial chunk of free Dublin real estate.
Already IRES REIT are making more money off the development than they initially forecast with The Irish Independent reporting on January 19th: “Canadian property giant IRES REIT is set to make even more money than expected on its purchase of 442 apartments in Dublin barely a month after it agreed to buy them from Nama. When the sale was agreed a month ago, IRES said the apartments were 85pc occupied and it was forecasting an annual yield of 8.1pc if they were fully occupied. Now though, the property is 88pc occupied and IRES believe it can get a yield of 8.5pc if it is fully occupied. The improvement in projections for the property will only fuel criticism of the sale, with Fianna Fail’s Michael McGrath calling on the apartments to be sold to individual buyers to help the capital’s housing crisis.”
Obviously I wanted to speak to someone in NAMA to establish how much the apartments went for. It was impossible to actually make contact with anyone from the organisation. Instead I had to go through a Dublin PR firm, Gordon MRM. They have had the contract to deal with NAMA’s PR since 2010. Figures provided by Finance Minister Michael Noonan in January show that the NTMA and NAMA paid Gordon MRM €177,959 last year. This represented an 8pc increase on the €165,059 paid out to the firm in 2014 and followed the €159,826 the NTMA and NAMA paid in 2013. In 2012 the figure paid to the firm was €223,723 (€142,653 from NAMA), in 2011 it was €205,388 (€142,653 from NAMA ) and in 2010 it was €207,255. This gives a total of €1,139210 (excluding VAT) which the Irish taxpayer paid for the organisation to answer questions from the press. I had to email my questions to NAMA spokesperson David Clerkin which were as follows:
I was to “attribute the following to a NAMA spokesman”:
1) The 2009 Act that established NAMA states that it has a mandate to “contribute to the social and economic development of the state” and it “shall have regard to proper planning and sustainable development.” If this is the case why did NAMA sell to a foreign vulture fund like IRES REIT who are backed by the Canadian company CAP REIT who have an atrocious reputation in Canada with regard to dealing with tenants and upkeep of property. As this company is also an offshore PLC they do not have to publicly show their accounts and don’t pay tax in this country. Answer: Your beliefs relating to NAMA and your understanding of the NAMA Act are incorrect.
2) IRES paid NAMA €83m for the 442 apartments at Tallaght Cross West, the sale was conducted through Nama-appointed receivers Deloitte. Experts say the commercial space and car park included in the deal is valued at €40million (based on €200 per sq.ft) thus this means the apartments are effectively being sold for an average of just €100,000 each; plus when the sale was agreed in December IRES said the apartments were 85pc occupied and it was forecasting an annual yield of 8.1pc if they were fully occupied. Now though, the property is 88pc occupied and IRES believe it can get a yield of 8.5pc if it is fully occupied. My question is, does NAMA truly believe this deal was in the best interests of the Irish taxpayer? Answer: “The apartments to which you refer were sold for an average of €180,000 and not €100,000 as you incorrectly claim.
3) I firmly believe NAMA is facilitating the biggest land grab in this country in generations and is not working in the best interests of the Irish taxpayer. I thought the idea behind NAMA was to warehouse debt and park it until the most opportune time instead NAMA have had a fire sale offering blocks of assests at knock down rates to their pals. Is this a fair description of NAMA? Answer “Your comments show that you have already formed strong opinions on NAMA that are based on false and/or inaccurate information and suggest that the article you propose to write on this matter will not be objective, informed or based on facts. All sales by NAMA receivers or debtors are openly marketed to ensure the best achievable price is obtained for the taxpayer.”
Upon receiving this email I called David Clerkin’s office to try and get some more satisfactory answers but he repeatedly refused to answer my calls or my voice mails.
CAPREIT REPUTATION IN CANADA AND RESPONSE FROM CEO DAVID EHRILCH
So what are CAPREIT like as landlords in Canada where they own over 40,000 homes? From searching on the net I came across a large number of websites where tenants from all over Canada make very serious allegations against the company. Through some of these I was able to make contact with people who have experienced first hand how the company treats their tenants. The response to my questions was overwhelming, in the space of two weeks over a hundred people contacted me. My question to them all was the same, what are CAPREIT like as landlords and should Irish tenants be worried. Here is just a small section of the responses I got.
Sherwin F: I would do whatever I can to help with this. I had personal experience dealing with CAPREIT in Ontario, and it wasn’t good at all. I have a lot of photos that were given to me by other tenants while I picketed outside of their buildings to raise awareness of the issues, and give other tenants information about what they could do. YES, they should be VERY worried.”
Deb Marcovitch: VERY VERY! WORRIED INDEED!
HMD: CAPREIT is a slumlord. They are disingenious. They have quite a few promotional videos on youtube. Notice that the comments are disabled for ALL of them. I wonder why that is? Is it that CAPREIT is worried that your future neighbours might try and warn you?
Donna Flynn: I just won 3 harassment cases against CAPREIT. After working with the Tenant’s Association on an increase that charged tenant’s more than the Landlord and Tenant Board approved, I, a tenant who never had any concerns raised by CAPREIT since moving in on March 6, 2004, all of a sudden was the target of several ongoing Applications to Evict me from 2012 to now. They had no cause for these applications against me. If they are saying they have satisfied customers, they are not paying attention to their annual report which shows their vacancy rate from the time I moved into a CAPREIT building in 2004 to now, have sky rocketed. Their own annual report shows their marketing costs have sky rocketed also. They bombard the market with marketing and deals. The rising marketing costs and vacancy rate, tell me, that even that aggressive sales approach is not working. I will be happy to share the court orders with you once L&T sends me the latest one from last Tuesday and the one from the next hearing in March.
Carol C: Dia ages Mhuire agat Padraig..yep I too had the pleasure of being a CAPREIT tenant for all of 16 weeks. My story is dreadful. I lived on the forth floor and was completely flooded due to maintenance neglect on their part. They refused to pay stating thats what my insurance was for………… my insurance refused to pay stating it was neglect on CAPREITs part. It was just awful, simply awful. I did nothing wrong yet went through 2 months of sheer hell. My privacy was invaded continually to a point I had to put my private paperwork in a bank deposit box as one of their employees entered my apt daily, even admitting to it. I had to take my lap top to work daily, I could leave nothing at home. I would tell anyone DO NOT RENT FROM THESE PEOPLE.
Jessica Lee Stephenson: My experience was a common one: I moved into a unit (with my 2 year old son) that was uninhabitable; aside from being infested with both cockroaches and bed bugs (which they tried to claim I brought with me), there were tons of repairs needed, which took forever and I had to keep harassing them. My son got sick from all the filth. I took them to the landlord and tenant board and I was awarded about 6 times what their paralegal offered me in mediation. They were heartless. We moved out after a few months. The neighbors we met there were in similar situations, but they did not have the knowledge or resources to stand up for themselves, and they were afraid to make waves. It was very sad
Petya P: CAPREIT management is absolutely terrible!! They never return calls, and never do repairs unless they are threatened with legal action or taken to dispute resolution. They will enter your suite without permission, tell you that repairs have been done when they haven’t, and increase rent by the maximum allowable by law. In BC there is no requirement for an onsite land lord so the staff is only available from 9-5 Monday to Friday and anything else requires you leave a message with the after hours message centre where they state that they will “send the message to the office” but the office will deny receiving these messages. They will let anyone and any amount of people move into a unit and refuse to address the issues of noise from tenants. I lived for a year with plugs that literally shot blue sparks out of them and cords would drop out on their own before I could get them to replace the sockets and even then I had to argue with them about how many they were willing to fix. They even tried to evict me for having a large dog claiming it was “against CAPREIT policy” even though there were several tenants with large dogs already in the building, and yet nowhere on my rental agreement said anything about this rule. This place is a nightmare and I wish that I never moved in. Your country should be very very concerned.
Andrew Crowley: Stay FAR FAR away from CAPREIT. Been in 2 of their managed properties, had issues with bed bugs and roaches in both.
Mike G.S: I used to live in Ocean Towers under Carpet and had a very unfavourable experience and I’m reluctant to rent with Capreit again. I was wondering if anyone had any any good experiences with
JKL: Nothing good to say about CAPREIT. Sorry. CAPREIT sucks. Source? I worked for them. I had to lie to tenants, lie about previous renters, lie about why the pest control guy was there 6X a week, lie about the safety of their vehicles, lie about the the only reason CAPREIT operates in HRM is to take advantage of international students and make them live in shitholes for super jacked up rent. we were encouraged to rent to international students over locals. strongly encouraged. because they totally will cough up 1,800 for an infested unit, based on the view and the proximity to spring garden road.
Lee S: I was a resident of theirs in the Montreal Olympic village for a year and had to move out. The place was falling down having been bought and sold on quickly by other property companies for years with no maintenance carried out. When CAPREIT bought the place in 2012 it was in really bad shape but they tried to get the tenants to pay for the restoration of it by putting up the rent so I moved out, wouldn’t want to deal with them again, Irish people should be careful.
With all this information to hand I contacted IRES REIT to get a comment. CEO David Ehrlich returned my call the same day. Here is what he had to say.
InTallaght: I have spoken to a lot of CAPREIT tenants in Canada and to be honest with you I was quite alarmed by the amount of accusations against the company from former and current tenants. Stories of bullying, intimidation, rent hikes and negligence were common. Is this what Irish tenants can expect?
David Ehrlich: Firstly I don’t think that is a fair representation at all, we have over 200,000 tenants and 99% of them are very happy with CAPREIT. You are always going to get 1% of tenants who are disgruntled. In Canada we are considered an excellent landlord. Ask any landlord or anybody involved in property there and they will tell you that. From surveys from tenants I have excellent feedback and response from them. Yes there are some negatives but the positives far far outweigh them. Just because people go on social media doesn’t represent everyone’s experience.
InTallaght: From what I have learned the figure would appear to be much higher than 1%. For example, of the 40,000 + apartments the company owns there have been serious allegations made regarding the 1,000 apartments in the Olympic Village site in Montreal. There are newspaper articles about a tenants demonstration at CAPREIT offices in Nova Scotia in October regarding issues with pest control. One of the numerous websites I encountered was started by a group called “Wheel Chair Rights” one of their headings is “Don’t ever move into an apartment building managed by CAPREIT” LINK: https://wheelchairrights.wordpress.com/tag/dont-ever-move-into-an-apartment-building-managed-by-capreit/
David Ehrlich: We only bought the Olympic Village site two years ago (Ed. note it was actually three) and we are dealing with all issues in relation to that. Again I say, we have over 200,000 tenants who are very happy. I have friends who live in CAPREIT apartments and they are very happy. We have won industry awards. You’re just wrong.
InTallaght: You have employed people who have worked for NAMA, you can understand I’m sure how this could anger Irish people?
David Ehrlich: We do have Charles Coyle working for us but all rules were completely obeyed, there was nothing untoward in that, everything was followed to the letter including the three months gardening leave. There was absolutely no conflict of interest.
InTallaght: At the IRES REIT AGM last year you spoke of increasing rents in Dublin. As I’m sure you’re aware we are in the middle of the worst housing crisis in the history of the state and we have foreign vultures like CAPREIT picking up fire sale priced property subsidised by the tax payer…
David Ehrilch: (Interrupts) Sorry but you are being very aggressive, I am getting a feeling you have a lot of hostility against the company…
InTallaght: Of course I have. What do you expect when you talk of squeezing more money out of Dublin tenants who are already paying extortionate rents as it is…
David Ehrilch: That’s just business. We’d love to offer cheaper rental properties…
InTallaght: Well why don’t you then?
David Ehrilch: Because the cost in acquiring them doesn’t make it possible. We wish the government came in with legislation to make it less expensive to acquire property. We bought these buildings off NAMA just as the rents were going up. I feel really badly for the Irish people and the housing problem in the country. I have met with the government to discuss what can be done to alleviate the problem.
InTallaght: Who did you speak to in the government?
David Ehrilch: I can’t say who. I think we’re going to be doing some building soon, it needs to happen because there are terrible problems with supply and demand.
InTallaght: Can you guarantee that Irish tenants will not have any of the problems I have heard from some of CAPRET’s Canadian tenants?
David Ehrilch: We will be excellent landlords. We have a 24 hour line which tenants can ring if they have any problem. We have all our own maintenance people so if tenants have a problem with for example the dishwasher or washing machine they will be straight out to fix it. We respond to calls straight way. I hope this article is going to be fair.
InTallaght: I hope IRES REIT is going to be fair…