As the Deputy will know, Activate Capital (Activate) is a new innovative non-bank financing platform that has been established by the Ireland Strategic Investment Fund (ISIF) and global investment group KKR to invest on a commercial basis in residential development projects in Ireland to help address the current supply shortages in the main urban centres. Activate is focused exclusively on lending to Irish residential projects and will target, in particular, new residential development in Dublin, the greater Dublin area, and Cork, Limerick and Galway which have been identified as the areas of greatest demand.
Activate is a €500 million fund, which is financed through a €325 million loan note provided from ISIF and a €175 million loan note provided from KKR. The €500 million represents the peak funding outlay at any one time but as borrowings are repaid this will create additional lending capacity over and above the original €500 million. Uniquely, Activate will provide up to 90% of project funding and will provide funding for both the acquisition of land and to bring projects through the planning process. The Activate base lending rate is approximately c.10% and, as would be expected for projects of this nature, there is participation in equity upside if projects are successful so that the fund, and by extension taxpayers, share in any gains alongside the project promoter. The pricing for Activate facilities reflects the provision of up to 90% of overall development costs and the fact that it is, in effect, taking a combination of debt and equity risk. Activate also offers the advantages of deliverability and speed of execution. The Activate model is capable of substantially quicker credit turnaround times than average time frames currently in the market place given the requirement, typically, for project promoters to deal with more than one lender, and sometimes multiple lenders.
It is estimated that Activate will, in this way, be capable of financing the construction of over 11,000 new homes in Ireland.
Whilst Activate is only in operation since the beginning of September, and therefore to date no capital has been drawn down, it has an active pipeline of projects and has been well received by the market. Activate is currently in discussions with a number of project promoters on potential opportunities.
