Construction BUSINESS

Pearl Property Managers Ltd has launched a new €50 million Residential Equity Fund which will provide equity investment for residential projects throughout the Republic of Ireland with a focus on larger urban areas including Dublin, Cork, Limerick, Galway and Kilkenny. The Pearl Residential Equity Fund will support the building of up to 2,000 new homes by small and mid-sized developers over the next three years.

The Fund will provide up to €5 million in equity for the development of new homes on residential sites with full planning permission and zoned residential sites. It will focus on mid-tier projects of up to 200 units.

Pearl Property Managers Limited, advised by Davy Corporate Finance, has been established by Ken McCullagh and Martin Scully. The fund is backed by State and private sector investors which includes AIB Group plc, Bank of Ireland, Davycrest, the Ireland Strategic Investment Fund (ISIF) and Oyster Capital. Pearl Property Managers Ltd founders Ken McCullagh and Martin Scully, both of whom have extensive interests in property and private equity investment are also investing in the Fund.

Since 2001 Ken McCullagh has been CEO of LNC Property Group where he built up a €500 million+ commercial real estate portfolio, while Scully is responsible for a wide range of private equity investments across a range of sectors for Oyster Capital Partners. The Fund’s investment committee will be chaired by Aidan O’Hogan, the former Chairman and Managing Director of Hamilton Osborne King, now Savills Ireland.

According to Ken McCullagh, a lack of equity finance is a key constraint for smaller and medium sized housebuilders many of whom were severely damaged during the recession. “With private equity and hedge funds financing mostly targeting  larger builders and large scale-developments, the lack of liquidity for smaller developers is a constraint on the supply of new housing stock,” he said.

Ken McCullagh said the fund will only partner with developers who have strong track records in housebuilding and residential development.   Developers must also be capable of accessing debt funding and will be expected to co-invest as part of the overall equity requirement.

“It’s very important that developers also have a personal investment in the development. We are not developers and we will not be buying land or sites directly and we won’t finance un-zoned or agricultural land projects. This is about providing support to smaller builders who can add to our housing stock and help address the housing shortage,” he said.

Paul McDonnell, Head of Corporate Banking Property Finance, Bank of Ireland said: “Supporting the delivery of new homes is of strategic importance to the Bank of Ireland Group. Our investment in this innovative fund complements our lending activities in this sector. Through it we are enabling small and mid-sized builders to deliver new homes and promote economic growth into the future. We are pleased to be working with Pearl and with our fellow investors in delivering much needed solutions to Ireland’s housing needs.”

Finlay McFadyen, Head of Investment Banking at AIB said: “We are delighted to partner with Pearl Residential Equity Fund. We recognise the national importance of increasing the supply of housing stock, particularly in large urban areas given the supply / demand imbalance that has developed over the last 10 years. Our commitment to backing the Pearl Fund demonstrates our support for this sector, enabling Pearl to provide equity finance to small and mid-sized developers which will accelerate the supply of housing stock in these urban areas.”

Kieran Bristow, Senior Investment Director at ISIF said:  “ISIF is working to deliver additional homes and has already committed over €916 million to investments that will increase housing supply throughout Ireland.  This investment will complement our existing housing supply investments by increasing our reach across the capital spectrum to address the challenges facing small and mid-size developers in accessing equity finance.  Increasing the supply of new homes – both for owner-occupiers and for renters – is a key element of ISIF’s investment strategy and we will make further investments in this area to achieve this.”

Ken McCullagh added that the Pearl Residential Equity Fund hopes to announce its first investment in the coming weeks.