Irish-US fund to commit €120m to housebuilding

Activate Capital, a €500m housebuilding fund that’s a joint venture between the Ireland Strategic Investment Fund and US private equity giant KKR, is likely to have committed upwards of €120m in capital to projects here by the end of the year, the Irish Independent understands.

It’s believed to have committed about €50m in capital to projects since the start of the year.
It’s thought that the €50m in funds that have so far been committed have been earmarked for deals that will see about 800 homes being built, largely in the greater Dublin region.

They’re likely to include a mix of starter homes and properties for homeowners who are trading up.
It’s believed that Activate Capital – which focuses exclusively on Irish residential developments – could also be priming a number of additional financing deals in coming months, which could see homebuilding schemes in other parts of the country backed by the firm.

Activate Capital was founded to help address a major decline in house construction in the country, with many developers finding it difficult to secure significant financing from banks. Private funds have been stepping in to fill the funding gap.
About 12,000 homes were built in Ireland last year – way short of the 25,000 a year that it’s thought are required for a market of its size. The Construction Industry Federation expects another 12,000 or so to be completed this year.

It’s likely that Activate Capital’s initial €500m fund will be deployed over two to three years.
But the funds will also be recycled and redeployed as loans are paid back by developers. That would probably see a total of about €1.5bn being loaned off the back of the initial €500m investment.

It remains to be seen if KKR and the State’s Ireland Strategic Investment Fund (ISIF) will eventually top up their joint venture with additional equity. ISIF contributed €325m to the existing €500m fund, with KKR stumping up the other €175m. When it was launched last year, Activate Capital said that it would provide up to 90pc of financing to development projects on a commercial basis.
Projects funded by the joint venture are expected to create an average of 1,900 jobs a year in construction and ancillary services.

Activate’s chief executive is Robert Gallagher and its chairman is Dan O’Connor.
It was reported earlier this year that Activate Capital had helped to bankroll the acquisition by developer Sean Reilly of development land loans that were held by US private equity group Lone Star.

Lone Star had bought the loans via the sale of Ulster Bank’s Project Clear portfolio last year.

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