Written answers

Wednesday, 1 February 2017

Department of Finance

Ireland Strategic Investment Fund Investments

Photo of Róisín ShortallRóisín Shortall (Dublin North West, Social Democrats)
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165. To ask the Minister for Finance the average interest rate, that is APR, charged to residential housing developers by the Ireland Strategic Investment Fund through its investments in companies (details supplied). [4814/17]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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As the Deputy will be aware, policy initiatives in the area of housing must seek to address the challenges faced by the various sectors of the market, including the private owner-occupier market, the rental market and the social housing sector. In line with its statutory mandate, the Ireland Strategic Investment Fund (ISIF) is examining opportunities to make, on a commercial basis, investments that have the potential to support increased supply of housing.

The Fund is already involved in a number of important initiatives which cumulatively can make a contribution to increased housing output. This includes its investments in:

- Activate Capital - which is an innovative non-bank financing platform that has the potential to provide funding for substantial numbers of new homes in Dublin and the other major urban centres in which demand is most pronounced;

- Ardstone Residential Partnership - which is a residential equity investment fund that is focused on delivering residential units to the market over the short-to medium-term; and

- WLR Cardinal Commercial Real Estate Mezzanine Debt Fund - which has funded a number of residential developments in recent months.

Activate Capital, which has the potential to fund the delivery of up to 11,000 new housing units over the medium term, has already advanced funding for the construction of 1,200 new houses in the greater Dublin area and has advised a healthy pipeline. The Ardstone Fund has to date acquired sites with the potential to deliver up to 1,800 new housing units which will be delivered over a 5-7 year time frame and has commenced construction on 165 units, it is targeting a total delivery of up to 3,000 new units. The WLR Cardinal Fund, which invests in multiple real estate sectors providing both pure finance and development capital, has already advanced funding for 1,700 new residential units.

ISIF invests through the various platforms described above and does not fund developers directly. Activate and the WLR Cardinal Fund both provide debt to developers at rates which vary according to the risk involved. Experience to date suggests there is significant demand for these products. Ardstone is an equity investor that takes development risk and as such is not a lender. It contracts house-building work to third party builders with the required capabilities.

In relation to interest rates charged by ISIF, ISIF invests on a risk adjusted basis. In this context, the interest rates applied by ISIF to any given investment relates to the level of risk and other investment criteria, including pricing, and reflects its mandate to act commercially and in a way that contributes to the local economy.

To give an example in the context of ISIF's investments in support of the residential sector the Activate base lending rate ranges from circa 6% to 10%, depending on the extent of leverage advanced and the risk characteristics of each specific project. As would be expected for projects of this nature, there may be a small participation in equity upside if projects are successful so that Activate, and by extension taxpayers, share in any gains alongside the project promoter.  

In addition to the foregoing, ISIF has committed to investing in over 3,000 student accommodation units to be built in DCU as part of the Campus Development Programme that has primarily been funded by ISIF and the European Investment Bank.

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