Over their first decade of operation, Ardstone Capital’s owners Donal O’Neill, Donal Mulcahy and Ciaran Burns perfected their ability to find the best property deals for investors ranging from wealthy Irish families to New York-listed real estate firms. As detailed in Part one of this investigation, they did this through office transactions across development, value deals and medium-term rental investments in Germany, the UK and finally Dublin, handling over €300 million worth of assets in the process.

By the mid-2015s, they were ready to help their investors make the most of the next big opportunity: Irish housing.

Much like Dublin offices, Ardstone first tested the residential market with a deal on behalf of individual investors. It purchased a group of 27 apartments in Malahide’s Robswall estate, put on the market in early 2016 by U+I, for a total of €6.3 million. They have since been sold on in private deals.

At the same time, however, its team, which had grown through the roll-out of the AVP office fund, was preparing a repeat of this institutional investment model in housing. In 2015, then Minister for Finance Michael Noonan had commenced legislation to establish Irish collective asset-management vehicles (ICAVs). Its objective was to facilitate multinational investment funds, removing the complications of having to establish a PLC to pool capital from multiple investors. Ardstone was among the first to set up an ICAV in November that year.

The vehicle was initially called Ardstone Residential Partners Fund. The ICAV has since become an umbrella fund called Ardstone Partners, while its first Residential Partners occurrence (also known as ARP I) has turned into one of multiple sub-funds.

In parallel, Mulcahy, O’Neill and Burns established Ardstone’s own property development subsidiary, Ardstone Homes, to manage operations from planning applications to construction contracts. Stephen Cassidy joined them to lead this side of the business and co-invested in Ardstone Homes, though The Currency understands he has recently sold his shareholding.

To prime the pump, Ardstone went to the state. In 2016, the Ireland Strategic Investment Fund (ISIF) injected the first €16 million of €25 million it was pledging towards ARP I. The Irish sovereign fund described this investment as a “commitment to a €184 million real estate fund that will provide new residential housing developments, primarily in the greater Dublin region”. ISIF later increased its available funding to €30 million. As money flowed in and out of ARP I, the book value of ISIF’s investment peaked at €27.5 million at the end of 2018.

Conor O’Kelly, the chief executive of the NTMA, which manages ISIF, told the Oireachtas in 2016 that its investment in ARP I was alongside those of Aviva Ireland and the An Post pension fund. Records from the Danish teachers’ pension fund show that it has also been an investor in ARP I since 2017.

Backed by these types of institutional investors, Ardstone’s fund began to shop around the disaster zone that was Irish residential property development in the mid-2010s, with the intention of delivering mid-market homes. Its team could see that the situation they had benefited from in the office market earlier was still stuck in the same position when it came to housing: legacy developers in Nama, activity stalled and demand building up.

Ardstone also quickly picked up that government policy under Noonan’s direction was to rule out the combination of Irish developers and banks that had dominated the industry in the lead-up to the financial crisis in favour of international investors regarded as more capable and less risky for the country’s balance sheet.

Buying from Nama with ISIF money

The ICAV legislation was a signal; Nama’s preference for deals backed by overseas money was another. Having stayed clear of Irish property throughout the crisis and convinced institutional investors to back its fund, Ardstone fit the bill. 

With all ingredients in place, the firm’s first significant acquisition through ARP I was in April 2016. Nama sold to the fund six development sites totalling 128 acres from the portfolio of Albany Homes, the company founded by David Daly. The price reported by The Irish Times was around €50 million. 

Ardstone’s first new Irish homes were built on one of them, the undeveloped part of the Drynam estate in Swords, Co Dublin. The site came with planning permission previously obtained by Albany for 156 houses and 24 apartments, to which Ardstone added 34 more apartments on an adjoining plot. 

In November 2017, Ardstone began to leverage investor funding to build out its first sites. The ICAV obtained its first loan agreement from Bank of Ireland, covering €62.4 million at a Euribor rate + 4 per cent for three and half years. €8.9 million of this was for the Swords site.

Ardstone Homes rebranded the estate as Muilleann and built it out at a cost of €41.2 million, according to company accounts to March 2021. By that point, the development was sold out. The 24 apartment blocks in the initial Albany scheme went to the social housing provider Circle for €6.9 million, while the 34 added by Ardstone were acquired by another approved housing body, Acorn, for €12.7 million. 

Dozens of houses sold privately in the Muillean estate have now appeared in the Residential Property Price Register at an average €308,000. Assuming this applied to all 156 in the scheme, this would amount to €48 million. 

Overall, the Swords property therefore appears to have cost Ardstone less than €50 million between land acquisition and development. With sales in excess of €65 million, that’s a €15 million gross gain.

Another former Albany site was a greenfield property outside Naas. Ardstone Homes applied for planning permission there for 183 houses in November 2017 and secured it six months later. This is now the Castle Farm housing estate. Just like Muillean, it has been fully developed and sold, with accounts allowing an assessment of its performance.

The site was guided at €7.5 million when ARP I acquired it. The Ardstone subsidiary booking development costs for Castle Farm reported spending €39.2 million. In the process, it received a €9.8 million tranche of the Bank of Ireland loan. At an average reported price of €301,000 per house sold, the 183 units can be expected to have grossed €55 million, resulting in a gain of over €8 million. This would not leave much after leverage – though each ARP I subsidiary reports an annual amount invoiced to the fund for “construction costs” and it is unclear if any profit margin is added to it.

Ardstone did not develop all the sites it acquired from Nama’s Albany portfolio. Instead, it sold the largest, with lapsed planning permission for 451 homes at Barnhall near Leixlip, and a smaller Co Kildare greenfield site at Kilbelin outside Newbridge. Glenveagh bought them for €50 million in 2019, covering the estimated price paid by Ardstone for the entire Albany portfolio three years earlier. This was not, however, the last of Ardstone’s presence at Barnhall, as we will see later.

Stocking up in Rathfarnham

Less than one year on from its first Nama deal, the ARP I fund went back for more. In August 2016, it began to line up a subsidiary targeting the portfolio of developer Frank Deane, which Nama was eager to put on the market. It took until the spring of 2017 for Ardstone’s bid to be successful. 

According to the Business Post at the time, the deal took the form of a €40 million acquisition of Deane’s loans secured on a group of sites along Stocking Avenue, just south of the M50 in Rathfarnham. One had planning permission for 122 houses and the other for 164 houses and eight apartments.

Ardstone allocated more than half of its 2017 Bank of Ireland loan to the project, or €33.8 million, and renamed it White Pines. The largest site was developed for sale and is now sold out. Most units have appeared in the Residential Property Price Register at an average of €423,000, indicative of a total of more than €70 million for the 172 homes sold in that phase. 

Ardstone then built out the smaller section planned by Deane Homes and branded it White Pines South, a housing estate dedicated to the rental market. When the first batch became available in 2020, agents Dillon Marshall quoted monthly rents from €2,350 for three-bed houses to €2,700 for five-beds. Land registry records from the end of last year indicate that this “brand new rental community” has now been transferred to a CBRE-backed vehicle, most likely Ardstone’s residential income fund.

With plenty more land available in the Stocking Avenue portfolio, Ardstone Homes went directly to An Bord Pleanála last year under fast-track strategic housing development (SHD) legislation to add apartments to the houses planned by Deane. The northern side of the site, where houses were sold, now has planning permission for 241 apartments – also destined for sale.

Last September, Ardstone obtained another SHD permission to add 141 build-to-rent apartments to White Pines South but the project is now at the centre of a High Court battle with local objectors, which was previously covered in detail by The Currency.

From Wicklow to Kildare

Outside Nama, Ardstone also went directly to landowners and developers for private land deals. One of them was Robert Moffett, a co-founder of the successful Combilift forklift manufacturer in Monaghan, who branched out into residential property development in the mid-2010s. In 2015, he obtained planning permission to build a 169-house estate called Ballinahinch Wood in Ashford, Co Wicklow.

Ardstone bought the project in May 2017 for an undisclosed amount and built it out, selling the houses for an average €334,000 equivalent to over €55 million in total. The firm then acquired a greenfield site across the road and obtained SHD permission for 117 houses and 16 duplex apartments now under construction. Ardstone directed €10 million of the debt finance raised from Bank of Ireland for ARP I to Ashford. This was the last glimpse we had of its leverage finance before Bank of Ireland refinanced it with a €110 million facility managed directly at ICAV level, with no details available in public filings.

Following the Ashford acquisition, Ardstone focused on a series of residential deals in Co Kildare. In two small transactions, it bought the partially built Hemmingway Park complex of 44 homes in Clane out of the liquidation of its developer Conex Construction, and later secured the 14-unit Old Mill Race estate in Monasterevin.

In Johnstown, Ardstone Homes built 106 houses sold under the Furness Wood brand for an average of €378,000 each, and secured planning permission for another 33 on a separate site before selling it prior to construction to a subsidiary of PBSM, the company of local property developers Patrick Blake and Michael Dunne.

“The group has entered into a commercial arrangement with Ardstone Homes to develop its strategically located landbank.”

Queally Group zoning submission

Ardstone returned to Naas in 2018 with its eye on a bigger prize. The town is one of the main industrial bases of the Queally family, hosting some of the largest meat and prepared foods processing plants in their business. As previously reported, the family controls tracts of additional land in the town. Among the second-generation leaders of the group, Liam Queally, who oversees its successful pet foods division, has an address at Bluebell Farm in Naas. 

The agricultural holding itself is the property of a subsidiary of the group, Arrow Finance. However, it was Liam who personally applied for planning permission to service the lands with a new access road in 2015. In the following years, the Queallys chose Ardstone to get the most out of the property.

In a joint submission to the County Council during the drafting of Naas’s new local area plan in 2019, their agent wrote: “The [Queally] Group, and other major employers in the town, have experienced issues with securing and retaining the highly skilled employees required in the competitive agri-food sector by reason of a shortage of suitable and affordable housing in the town. To proactively address this issue, the group has entered into a commercial arrangement with Ardstone Homes to develop its strategically located landbank in Bluebell, Naas for residential use.”

As detailed at the time, they were about to embark on a first phase of the project and build 97 houses and 28 apartments in a field along the new access road, where they had just obtained SHD planning permission. The estate, called White Well, was completed earlier this year and entirely leased by Kildare County Council for social housing.

The 2019 submission also sought the rezoning of a larger plot of agricultural land behind the permitted development for residential use – to no avail. The Queally Group has repeatedly lobbied for the same change of use ever since, most recently during the drafting of a new local area plan for Naas from 2021 to 2027, saying that the land is “part of a larger Queally landholding at Bluebell where some additional land could be designated for recreational purposes”.

Last August, Liam Queally wrote to the council and repeated that the target field “can readily be developed as a logical second phase of the White Well development carried out by Ardstone”. His request was rejected again and the land remains stubbornly for agricultural use only on the zoning map published in December. Meanwhile, the access road he had built continues past the completed phase one of White Well to end in a cul-de-sac on the edge of the contentious field, with temporary fencing and an abandoned trailer firmly indicating that its owner intends to revive it as a construction site one day.

One site, three High Court cases

ARP I’s largest project in Co Kildare was to be a combination of 184 houses and 182 apartments along with a creche at Capdoo in Clane, where Ardstone Homes obtained SHD permission in 2019, but objectors took An Bord Pleanála’s decision to the High Court. Although the parties agreed a settlement mid-way through the hearings, the judge initially decided to refer the case to the Court of Justice of the EU in April 2020 to clarify whether particular issues raised about the Irish planning process were compatible with European environmental law. He later backtracked and the planning permission was finally allowed to stand. To complicate things further, part of the site was earmarked for a road extension by Kildare County Council.

After all that, Ardstone decided to sell Capdoo rather than build it out. This led to another High Court dispute last year with a potential buyer, Killross Properties, a company controlled by Co Kildare businessmen Lawrence and David McKenna. Documents show that the Capdoo site was finally sold last month to another subsidiary of Blake and Dunne’s Maynooth-based PBSM.

Both the Johnstown and Capdoo sites sold to PBSM were in areas where a 2020 update to Kildare’s county development plan slashed the number of new dwellings expected to be built by 2023. In Ardstone’s submission to the council ahead of the decision, Ardstone Homes’s managing director Stephen Cassidy wrote: “We consider that these revised targets are ridiculously low.” Ardstone then challenged the variation of the county development plan in the High Court, but it still stands to this day.

After building out and selling a smaller 76-house estate in Oranmore, Co Galway in 2019 and 2020, the final phase of ARP I investment has focused on large strategic housing developments. 

One year after the death of former Taoiseach Liam Cosgrave in 2017, Ardstone acquired from his estate the 15-acre site on Dublin’s Scholarstown road, where he used to live in a simple bungalow surrounded by “unproductive agricultural land, zoned for residential purposes”, according to planning inspectors. The property was a rare south Dublin infill development opportunity within the M50, reported to have been valued at €33.7 million in Cosgrave’s will.

In March 2020, Ardstone Homes obtained SHD permission for the Two Oaks complex of 590 apartments – 480 of them to rent and 110 for sale. The development includes a creche, two shops and two cafés or restaurants. Construction is now well under way, with €3.8 million spent in the first year despite it coinciding with the worst Covid-19 lockdowns. It is slated for completion this year.

Two more large housing developments have yet to emerge from lands owned by the ARP I fund. In Crodaun near Celbridge, Co Kildare, Ardstone homes secured SHD permission in September 2020 for 218 houses, 154 apartments and a creche. The development is to be marketed as Ardrath this year. 

The fund acquired the site in 2019 from Longport Developments, a company controlled by local businessman Damien Degan and his Dublin partner Colum Peters, who had previously developed commercial buildings in the area. Although the transaction price was undisclosed, Longport reported subsequent capital reduction transactions that allowed it to extract €4.8 million in cash for its shareholders. The Crodaun site entered the collateral pledged by Ardstone for its freshly refinanced Bank of Ireland debt facility in March of this year, signalling the start of construction works. 

The ARP I fund also owns Ardstone’s only reported investment in Cork so far – a greenfield site in Ardarostig on the city’s south ring road, where it obtained SHD permission last September for 137 houses, 139 apartments, a creche and a café. 

As it focuses on building out these final projects, The Currency estimates that ARP I has spent at least €100 million acquiring development land since early 2016. Accounts to March 2021 showed that it had invested another €250 million in building out projects, with more yet to come. This was funded with up to €200 million from its own investors and around €100 million from Bank of Ireland’s revolving debt facility.

A source familiar with the firm’s business said its first residential fund had planning permission for 3,500 homes, of which it had completed 1,200 and over 900 more were currently under construction. This is consistent with documents seen by The Currency, which confirm at least 3,300 housing units permitted in ARP I portfolio, of which 3,000 built or to be built by Arstone Homes.

The Currency estimates that this fund has sold close to €400 million worth of homes and over €60 million of undeveloped land at this point, before the proceeds from some of its largest projects such as Two Oaks, Ardragh or the White Pines apartments go on the market. Ardstone claims that ARP I is on course to add two thirds to its investors’ capital over nearly eight years, equivalent to an IRR of over 15 per cent by the end of 2023. This appears to be realistic – subject to the successful completion of its larger and more contentious SHD projects.

To let: hundreds of Dublin apartments

While the bulk of homes built under the ARP I fund were sold individually as traditional owner-occupied dwellings, a number of deals marked Ardstone’s entry into the private rental sector (PRS) and social or affordable housing, such as the apartment blocks sold to approved housing bodies in Swords; the section of White Pines dedicated to private rental houses in south Dublin; and the Naas estate transferred to a long-term investment structure and leased to Kildare County Council.

This has become the main focus of the other funds launched by the firm ever since. And another investment manager wanted to step into the rented housing gap, too – Ardstone’s old friend CBRE. 

In 2018, CBRE GIP established a dedicated fund called Irish PRS and partnered with Ardstone to tackle the higher-end, private side of the rental market in south Dublin. CBRE and its GIP clients are the only investors in this joint venture, providing 99 per cent of the funding, with a 1 per cent stake for Adstone itself. 

Their first opportunity was a site owned by Dunnes Stores next to its supermarket in Cornelscourt, where the retail group had failed to overturn an €840,000 vacant site levy imposed by Dún Laoghaire-Rathdown County Council and sold it instead. Ardstone and CBRE formed a subsidiary, Cornel Living, which booked €36.3 million in acquisition costs for the property. 

An Bord Pleanála initially refused SHD permission for 468 homes on the site in 2020. Cornel Living re-applied the following year for a plan revised down to 412 apartments, seven houses, a creche and a shop or café, adding communal spaces that were found to have been lacking initially. The proposed blocks were up to 12 stories high and attracted over 50 objections.

An Bord Pleanála gave the green light two months ago. This month, however, the Willow Grove Residents Association, which had opposed planning permission, challenged the decision in the High Court. Just like opponents to the White Pines South rental apartments, the plaintiffs in this case are represented by the specialist planning objection solicitors FP Logue.

Ardstone and CBRE’s next move was the acquisition of Dunleary House and its adjoining yard, previously known as Tedcastles because of its association with the historic fuel business. The property overlooks Dún Laoghaire harbour. The subsidiary Ted Living was formed in late 2018 and booked €11.1 million in site acquisition costs.

The previous owner, Stephen MacKenzie, had a commercial development planned there. Instead, Ted Living initially applied to An Bord Pleanáka for 161 build-to-rent apartments in 2020, before withdrawing and scaling down its plans to 146 apartments in a fresh application last November.

In the meantime, the late 19th-century Dunleary House had been proposed for inclusion in the record of protected structures. Its demolition was already banned in the past. Ardstone’s plan includes removing the roof of the house and placing a three-story modern extension on top of it. In their application, Ardstone’s architects referred to examples of upward extensions to historic buildings such as the Tropical Fruit Warehouse on Dublin’s quays, though their proposal for Dunleary House can’t be said to be just as elegant. 

The planning application is going to an oral hearing on Wednesday after the county council and third parties raised concerns. An Bord Pleanála itself doesn’t seem convinced by the design and warned in the hearing’s agenda: “The proposed works to the proposed Protected Structure involve the removal of substantial elements of the form, and the introduction of extensions that have the potential to overwhelm the existing structure. The applicant is requested to provide further elaboration or justification in respect of the removal of the roof of the proposed Protected Structure, and the appropriateness (in full or in part) of the proposed three additional floors.”

The third and largest project in Ardstone’s CBRE PRS portfolio is on Sandford Rd in Ranelagh. Their development vehicle Sandford Living spent €70 million on a site sold by the Jesuits – the disused Milltown Park seminary next to Gonzaga College. 

Sandford Living applied for SHD permission covering 671 build-to-rent apartments and a creche last September and got the green light from An Bord Pleanála just before Christmas, despite 169 objections including those of local TDs Jim O’Callaghan and Ivana Bacik and several local residents’ groups. 

“In recent years, Z15 lands have come under increased pressure for residential development.”

Dublin city draft development plan

The entire site formerly and currently owned by the Jesuits is zoned Z15, which at the time of the application was labelled “institutional and community” in the city development plan expiring this year. Sandford’s planning application, drafted by Thornton O’Connor consultants, went beyond the 25 per cent public open space requirement for this zoning and successfully squeezed through the flexibility allowed under Z15 rules at the time, by demonstrating balance between residential development on its own site with the continuation of Gonzaga College and a smaller Jesuit community on properties retained by the order on adjoining properties.

A few weeks later, however, the draft city plan for the next seven years came out, setting Ardstone and Dublin City Council on a collision course. “In recent years, Z15 lands have come under increased pressure for residential development,” the proposed plan noted. “Limited residential/office development on Z15 lands will only be allowed in highly exceptional circumstances,” it added. This would only be permitted when house or office building is “ancillary in scale to the primary social/community use”. In addition, “in all cases the applicant shall be the institutional owner/occupier”. 

In a submission responding to the draft plan filed by Ardstone’s Cassidy, Thornton O’Connor wrote: “Given the substantive changes that are proposed to the current Z15 zoning, it is no longer appropriate for the Site and would have the effect of sterilising it for development.” In a veiled threat, the submission on behalf of Sandford Living listed two previous legal challenges lost by the council over Z15 zoning, adding that the firm had retained high-powered solicitors Arthur Cox to defend against an “an unlawful and unconstitutional breach of its property rights”.

As an alternative, it suggested the rezoning of its Sandford Rd development site to the Z12 category “Institutional land (future development potential”, where build-to-rent apartments are open for consideration.

Dublin City Council’s chief executive Owen Keegan supported this in his interim report published on April 29, acknowledging the planning permission granted to Sandford Living last December. He also noted that the old seminary no longer has any institutional function and Gonzaga College has sufficient land for its future development. A zoning decision in the final city development plan is expected this autumn.

Thanks to the transparent structure of Ardstone and CBRE’s PRS investment fund through Irish property-owning vehicles funded with shareholders’ loans, we can see how much they are investing in these three projects and how much each partner is earning from them. 

So far, CBRE GIP has advanced a total of €124 million to Cornel Living, Ted Living and Sandford Living. Just over half of this funding is interest-free and the rest attracts interest at 9.41 per cent. At the end of September 2021, the three projects had incurred €17.8 million in combined interest owed to CBRE, representing the minimum gain it is expecting to make from them. Meanwhile, Ardstone has loaned €664,801 over the three projects and generates its main income from them in the form of fees totalling €3 million to date.

Social, affordable – and profitable

There are, however, only so many sites and tenants suitable for expensive build-to-rent apartments in south Dublin. 

The demand for cheaper rental housing is the target of a separate, open-ended fund established at the end of 2020 by Ardstone under its umbrella ICAV, again with CBRE backing. The Ardstone Residential Income Fund (ARIF, sometimes also branded “Ardstone Residential Impact Fund”) is designed to deploy 30 per cent of its investment in social housing and the balance in the “affordable” category understood to be at or under mid-market prices, according to a source familiar with its strategy. The purpose this time is to hold the buildings and collect rent from them over a number of years.

In May 2021, CBRE GIP revealed that it had committed €450 million on behalf of its clients to ARIF. “Since launching in January 2021, the fund has acquired ten assets comprising 1,275 newly constructed units representing three of the top five largest transactions to occur in the Irish market this year,” CBRE reported at the time. “It also has an exclusive pipeline of 2,500 additional units, with more acquisitions to be announced imminently.”

A number of investors have since reported their holdings in ARIF, all based in the Netherlands. The property investment firm Bouwinvest announced a €75 million commitment one year ago and its European portfolio manager Jasper Petit said in a statement at the time: “Specialists like Ardstone, who have boots on the ground, give us local market knowledge and access to the increasingly sought-after affordable and social rental housing asset class.

“In our home market, the Netherlands, there is a huge shortage of rental accommodation in the mid-range and social segment. A similar situation exists in Dublin. That supply/demand imbalance in Dublin is precisely what we are targeting with our investment, as this enables us to create value in both social and financial terms.” The Currency understands Bouwinvest’s investment has since increased to €100 million.

The fund’s largest single investor disclosed to date is NN Group. The Dutch banking and insurance group reported a 45 per cent stake in ARIF at the end of 2021, corresponding to a book value of €178 million on its balance sheet. NN Group also disclosed essential 2021 figures for ARIF as a whole. The fund had €540 million in assets and €147 million in liabilities, having collected €28 million in revenue and incurred €1 million in expenses in its first year.

End 2021 accounts for ING’s Stichting Pensioenfonds, meanwhile, showed it held a stake in ARIF valued at €38.6 million. An Irish pension fund has also invested €125 million in ARIF, the source said, adding that ARIF had now made deals for 18 assets worth a total €1.1 billion and comprising 2,500 homes.

To leverage those institutional investments, Ardstone raised a €130 million green loan in October 2021 from Nuveen, the US lender controlled by the Teachers Insurance & Annuity Association of America.

It is difficult to track ARIF’s activity in the property market. Ardstone has transferred an undisclosed number of completed properties from its ARP I development fund to ARIF, triggering no apparent change in ownership as both are sub-funds of the same ICAV. 

Unlike Ardstone’s CBRE-backed fund operating in the commercial PRS sector, ARIF has no property-owning limited companies as frontline vehicles. Instead, it uses limited partnerships, a secretive corporate form where no public information is available. Their very existence is only mentioned in a register updated irregularly by the Companies Registration Office. Moreover, some of ARIF’s deal are in the form of pre-funding for projects managed by other developers, and there have been no vehicles or property transfers recorded for them yet.

Still, The Currency has matched six of ARIF’s limited partnerships to residential complexes in Dublin and its commuter belt. Ardstone is no stranger to one of them – the Barnhall site in Leixlip, Co Kildare, which it sold out of its ARP I fund to Glenveagh as detailed above. Of the 450 homes since built there, ARIF went back last August to buy 61 apartments for €22.6 million. It then leased 49 of those to Kildare County Council for social housing.

Weeks before, it had acquired Colmcille House, a block of 23 apartments in Dublin’s Stoneybatter neighbourhood, for just under €10 million. The building was developed by Bartra and leased to Dublin City Council before the deal.

Around the same time, Ardstone closed a much larger deal with developer Dwyer Nolan, paying €181 million for a portfolio of three properties totalling 401 apartments across north Dublin. The largest was Santry Place, where ARIF acquired 205 apartments on completion for €88.3 million. The rest of the deal covered the forward purchase of a 125-apartment development at Hampton Wood in Finglas and another 68-unit building called Windermere in Clongriffin while they were under construction.

Last November, ARIF made two more deals. One was for 151 apartments in O’Flynn’s Beech Park development at Cabinteely in south Dublin. The fund paid €58 million for the property and offered half of it to the local authority for social housing. Around the same time, in Bray, ARIF bought the 71-apartment Dargan Hall from Glenveagh for €23.9 million. The building is leased to Wicklow County Council for 25 years.

The latest transaction attributable to ARIF is an acquisition in Citywest notified to the Land Registry just last week. The property is developed by Glenveagh, which announced in a trading update on April 28: “The group has closed the forward-fund transaction for 320 apartments in Barn Oaks, Citywest, Dublin. This site is now under construction and will deliver land sale and development revenue in H1 2022.” The forward funding came from Ardstone, and this is now materialising into the apartments’ transfer to ARIF. Glenveagh declined to reveal the transaction amount when contacted by The Currency.

Patrizia braces for impact

Just across the road from Barn Oaks, Ardstone also owns the Citywest shopping centre, which it bought from Goldman Sachs at the end of last year. The price paid was €30 million, according to The Sunday Times at the time. The property came with planning permission for a strategic housing development of 290 apartments. 

This deal allowed Ardstone to draw in a new investor hungry for Dublin residential deals in recent years: Patrizia, the buyer of its Düsseldorf hotel. The German investment firm landed in Citywest via its Copenhagen-based international arm. The shopping centre itself is funded by PMM, a global commercial property fund run by Patrizia with the Danish pension provider PKA as one of its lead investors. Leverage debt came from AIB. 

The residential side of the project, however, will attract funding from Patrizia’s new “Sustainable Communities” fund. The German firm launched it earlier this year, describing it as its first “product purely dedicated to impact investing, in a strategic commitment to significantly boost the company’s impact investment activity”.

The fund targets €500 million to finance social housing and community infrastructure in 25 under-served European cities and Citywest was its first deal. PKA and another Danish pension fund, AP Pension, were its initial contributors with €125 million. Ardstone has also built bridges for investors in its ICAV to join Patrizia in Citywest through two sub-funds – one for commercial property and the other for residential development.

Through the CBRE-backed ARIF fund and the latest Sustainable Communities investment with Patrizia, Ardstone is targeting not only healthy financial returns, but also what the German firm described as “impact” – the ability to report social, environmental and governance benefits to their own investors.

To avoid a free-for-all in such ESG claims, the European Union is trying to agree a so-called taxonomy of sustainable investments, setting defined categories of environmentally or socially beneficial capital deployments. The proposed regulation applies increasingly stringent reporting obligations on investment funds depending on how green they claim to be.

Patrizia wants its Sustainable Communities fund to meet article 9 of the regulation, which will award the darkest green label. This means tracking performance in detail, such as the carbon emissions saved thanks to the energy efficiency of the buildings financed by the fund.

As the “boots on the ground” for international investors, Ardstone itself is now going down the same route. The majority of its estimated €2.5 billion in assets under management is engaged in the most contentious market in Ireland – land, and how it is used to solve the housing crisis – leaving it with no choice but to display the highest standards of corporate social responsibility. 

Ardstone’s team has so far operated under the radar, avoiding publicity and media exposure. This investigation is the first attempt at giving the full picture of their business. Their financial performance has been strong and they are free from the baggage associated with the financial crisis. Their next challenge, however, is to demonstrate to the public how private investment can contribute to the national struggle to deliver enough homes for everyone.

Further reading

Who is Ardstone? Part 1: A decade of office deals from Dublin to London and Barcelona

4,000 Irish homes, over €1bn in assets and a direct line to Wall St: under the hood at Avestus Capital Partners

The Comer brothers’ Irish empire: 80 companies, €1.2bn worth of property, 4 offshore jurisdictions