Rent Reforms And Dublin Supply Shortage Will Drive Stronger Long Term Rental Income Stability

Catalysts

About Irish Residential Properties REIT

Irish Residential Properties REIT is a Dublin focused private rented sector landlord that owns, operates and actively recycles a large portfolio of high quality residential units.

What are the underlying business or industry changes driving this perspective?

• Forthcoming rental regulation changes from March 2026 allow units to be relet at market rent, enabling IRES to gradually capture the estimated 19% embedded rent discount and support sustained growth in revenue and earnings.
• Chronic undersupply of rental accommodation in Dublin combined with strong tenant demand underpins effectively full occupancy and near 100% collections, providing a resilient base for stable cash flows and expanding NRI margins.
• Stabilized and potentially compressing PRS yields in Ireland relative to lower sovereign bond yields create room for valuation uplift on the EUR 1.23 billion portfolio, directly benefitting NAV per share and long term total return.
• Recycling non core units at roughly a 4% net yield into newer, higher yielding bolt on assets under the new framework should enhance portfolio quality and support higher net margins and adjusted earnings growth over time.
• Highly scalable, fully internalized and digitalized operating platform, combined with cost discipline, is driving margin expansion and positions IRES to translate any portfolio growth or rent reversion into outpaced growth in net income and EPRA EPS.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Irish Residential Properties REIT's revenue will decrease by 3.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 35.2% today to 41.5% in 3 years time.
• Analysts expect earnings to reach €32.2 million (and earnings per share of €0.06) by about December 2028, up from €30.0 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 28.2x on those 2028 earnings, up from 16.5x today. This future PE is greater than the current PE for the GB Residential REITs industry at 16.5x.
• Analysts expect the number of shares outstanding to decline by 0.97% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.8%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Regulatory momentum could reverse or stall, for example if the March 2026 rent reform is delayed in legislation, diluted in implementation or followed by new restrictions. This would limit the ability to capture the estimated 19% embedded rent reversion and constrain long term revenue and earnings growth.
• The asset recycling strategy depends on continuing to achieve disposals at approximately a 4% net yield and 25% above book value. If housing market liquidity weakens or buyer demand softens, disposal premiums and proceeds could fall, reducing capital available for reinvestment and putting pressure on revenue growth and net margins.
• Long term interest rates may remain structurally higher than management anticipates or credit spreads could widen for Irish real estate. This would keep financing costs elevated, limit yield compression on the EUR 1.23 billion portfolio and cap future growth in net income and NAV per share.
• Chronic undersupply of rental accommodation and near full occupancy are central to the bullish case. If new government initiatives and planning reforms trigger a stronger than expected increase in competing PRS supply over time, IRES could face slower rent growth, more tenant churn and downward pressure on NRI margin and EPRA earnings.
• The current margin expansion relies heavily on tight cost control and internalized operations. However, sustained inflation in wages, maintenance and compliance costs or rising ESG and building standards over the next decade could erode the 78% NRI margin and slow growth in adjusted earnings per share.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of €1.42 for Irish Residential Properties REIT based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €1.6, and the most bearish reporting a price target of just €1.3.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be €77.6 million, earnings will come to €32.2 million, and it would be trading on a PE ratio of 28.2x, assuming you use a discount rate of 7.8%.
  
• Given the current share price of €0.94, the analyst price target of €1.42 is 33.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.