US fund lifts Irish property firm stake

TIAA-CREF, which manages $889bn worth of assets, has lifted its stake in the listed landlord and developer, Hibernia REIT, underlining the appeal of the still nascent sector to major US investors.

The New York-based company crossed the substantial shareholder threshold on Monday, a day before Hibernia unveiled its annual results.

While TIAA CREF’s exposure rose incrementally, taking it to 5.09pc from 4.90pc, the higher weighting comes as Irish real estate investment trusts continue to trade at a discount to their net asset values.

REITs are widely perceived as a proxy for bonds, according to Investec’s Philip O’Sullivan – a dynamic that has undermined their share prices in recent months.

Listed landlords are perceived as attractive incomeproducing assets when bond rates are falling but suffer when growth and inflation expectations are rising.

But Mr O’Sullivan pointed out this investment thesis ignores Ireland’s fast paced economy, increasing commercial property valuations and the expected fillip to both from a string of post-Brexit relocations.

He added that a positive yield arbitrage has opened up with direct commercial property yields at 4.6pc compared to 0.8pc on benchmark government bonds.

TIAA-CREF formed part of a first wave of US investors into Ireland’s freshly-created REIT sector in 2013, injecting equity, alongside asset management titans like BlackRock, into Green REIT’s intial public offering. Hibernia made its debut six months after Green.

Shares in the developer of Windmill Lane, shot up by over 5pc this week after the trust revealed a increase in the valuation of its portfolio and raised its final dividend.