Trinity House Investments seeks green 
pastures in Irish rental housing investments

By Timothy Tay / EdgeProp Singapore | March 20, 2020 6:00 AM SGT

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SINGAPORE (EDGEPROP) - Trinity House Investments (THI), a private equity real estate investment company with a focus on markets in the United Kingdom and Republic of Ireland, is growing its rental housing portfolio in Ireland while eyeing lucrative deals in the rest of the UK this year. 


The private firm already holds various property assets in the UK that are collectively worth more than GBP140 million ($243 million). Most of its investment ventures have been led by managing director Quah Kay Beng, a seasoned industry professional with a successful track record in managing commercial real estate deals around the world. 

Quah has spent most of his career working on commercial real estate deals in the UK. (Picture: Albert Chua/The Edge Singapore) 

“[At THI], we are value investors and very returns driven, so in these uncertain times it may be the best time to pick up a bargain. There will be deals to be had in times of distress, and we see that there will be more [acquisition] opportunities in the next six to nine months,” says Quah.


Adding value to property


The private fund’s first acquisition in the UK was in 2013, and involved a mixed use building called Sovereign House in London’s upmarket Covent Garden district. According to Quah, “at this time, Asia was already coming out of the Great Financial 

Crisis (GFC) in 2008, but the UK market took relatively more time to recover.” The 22,000 sq ft, retail and office development was going for GBP550 psf, compared to the value of neighbouring residential buildings which were on the market for close to GBP1,200 psf. “It was not a distress sale and was very much a market sale. We eventually did the underwriting and after the bidding process had to pay slightly over the asking price. But even at [GBP550 psf], acquiring the property still made sense to us,” says Quah. 

Sovereign House in London’s upmarket Covent Garden district was THI's first acquisition in the UK property market in 2013. (Picture: THI) 

Back then, commercial rents in the building were about GBP27 psf per month, but rents are now about GBP40 psf per month and capital values have risen to more than $1,100 psf. Two years ago, THI turned down an offer that was more than twice their original purchase price for the property because they saw the offer was too low at the time, says Quah. 


“We knew there were improvements planned for the area and we felt the price was too low at the time. There have been improvements such as a pedestrian zone in front of the building that benefits the ground floor retail units and increases their value. So we know there is further value to be gained from the property,” he says.


Life-long passion


Quah’s interest and focus on commercial assets in the UK stems from his experience in the property markets there, which started when he was a graduate trainee with the former DTZ in London. He moved on to manage a pan-Europe industrial fund and then joined JPMorgan in London to manage their UK commercial portfolio. 


“The UK and Irish markets have a lot more depth and there are many angles from an investment point of view. The market is also less regulated than Singapore’s. For example, there is no plot ratio and it’s a case of negotiating with the planning authorities to see what can be developed,” says Quah. 

The 32,000 sq ft residential site in Wembley was acquired without planning permission. After seeing it through its planning phase and development, the firm exited it with a 20% internal rate of return on the investment. (Picture: THI) 

In some cases as part of its investment strategy, THI has stepped in before a plot of land has received any planning permission, seeing it through the planning process and then selling it to a developer to build the property. “We take the land through the planning stage and at that point we probably get about a 27% internal rate of return on the asset, but we are also taking on the planning risk,” says Quah. 


This was the strategy Quah and THI adopted for a site in Wembley that they bought in 2015. The 32,000 sq ft site was acquired without planning consent and THI eventually took a majority stake in a joint venture with a local developer to build a 200-unit residential project on the site. The firm exited it in 2017 with a 20% internal rate of return on the investment.


Rental housing in Ireland


The investment flexibility and pro-landlord tenancy regulations are some factors that encouraged THI to invest in the rental housing market in Ireland. Since 2018, the firm has acquired two sites in Dublin to develop into rental housing for the Private Rental Sector (PRS) there. 


In September 2018, the firm acquired a 0.22ha residential plot in Dublin that is 2km from the city centre and close to several schools and colleges. Two months later, it also acquired a 0.85ha residential site near the M50 motorway, the main expressway around the city that provides access into the city, airport, and port tunnel. Quah says that both sites will collectively house about 1,500 new units that will comprise 1,000 PRS units and 500 co-living apartments, pending planning permission. 

THI plans to build 1,500 rental housing apartments in Dublin, and is looking to grow its position in this market over the next few years. (Picture: THI) 

One reason why THI has chosen to focus on rental housing in Ireland is the shortage of affordable housing supply in the country, as a result of under-building in the years after the GFC of 2008. Another reason is the rapidly growing population of young, welleducated workforce migrating into the city, who are mostly employed in the major technology companies setting up in Dublin. 


He adds that it is also helpful that tenancy laws in the UK tend to favour the landlord. For example, tenants of PRS apartments pay commercial leases, and the tenant pays for the property tax, utilities, and insurance. 


In Ireland, the minimum rental period for a PRS is six months, but on average, most tenants tend to sign leases of about four years, says Quah. 


“In Europe and the UK, the younger generation are finding it more difficult to afford to buy a home, and an increasing proportion now prefer to rent instead. In many of these countries, home ownership among the current 25 to 40 age group is lower now than it was 30 years ago. So there is a real demand for rental housing, and we see demand for this sector continuing to grow,” says Quah.


Investment strategy


In its initial years from 2013 to 2017, THI largely structured its property investments independently, with Quah sourcing lucrative deals and crunching the numbers on the potential returns and yields with his team before pitching it to their private group of high net-worth private investors. 


“The minimum investment in our fund is GBP250,000, but on our other direct real estate deals it is normally around GBP100,000 or EUR100,000,” says Quah. 

THI and its partner Lighthouse Canton plan to rebrand its hotel portfolio and bring in international chains such as Marriot and Hilton to manage the assets. (Picture: THI) 

In 2017, the fund established a closed-ended, UK commercial real estate focused fund. 

The fund holds hospitality assets such as THI’s stake in a GBP500 million portfolio for 26 family-friendly hotels outside London. According to Quah, hotels make up the largest proportion of properties in its UK portfolio. 


The hotels are managed by a local hotelier called Q Hotels, and the portfolio of properties comprises 3,689 rooms and 1,356ha of land. However, THI and its partner in the closed-ended fund, Lighthouse Canton, plan to rebrand the hotels and will get international hotel chains like Marriot and Hilton to manage the hotels in the future, says Quah. 

THI also holds HSBC Centre in Cardiff, a banking hall and office building leased to HSBC Bank. (Picture: THI) 

Another major property asset held by the closed-ended fund is the HSBC Centre in Cardiff, a freehold period-listed banking hall and office building that is let on a longterm lease to HSBC Bank.


Opportunities amid uncertainty


With the Covid-19 outbreak and current market uncertainty, Quah says that THI is on the lookout for acquisition opportunities this year. “For example, some funds might need to sell certain assets to cover redemptions, and these opportunities may only be open for a short period, so we need to act fast,” he says. 


He adds that the firm also owns a stake in a large portfolio of hotels, a sector that will be directly impacted by the disruption caused by the pandemic. “All our assets under management are very low geared, circa 50% leverage, so from a loan-to-value (LTV) perspective, we are relatively safe. We are in the midst of renovating a number of our hotels at the moment, so we can hopefully catch the market when it recovers.” 

The most recent acquisition by the firm was a data centre in Heathrow last year. The firm is looking to add more data centres to its portfolio in the future. (Picture: THI) 

On March 16, UK Prime Minister Boris Johnson called on members of the public to avoid “all non-essential contact with others”, and to work from home if they can. At the time of writing on March 18, the UK government has not implemented stricter border control measures, and schools, museums, and restaurants remain open for now. 


On top of the uncertainty caused by the pandemic, Quah also says that in the post-Brexit environment, the UK property market is characterized by a price mismatch between property buyers and sellers, with buyers expecting bargains on the market but sellers not conceding any ground. 


“But we feel there could be more distressed sales coming to the market in the next six to nine months, and I expect the market will start to reprice downwards,” says Quah. He hopes this will mean much more reasonable prices in the UK for the firm to capitalise in its upcoming acquisitions.