They were known as the “Irich”, up there with the Israelis, Russians and Arabs in terms of the cash they could bring to a London property deal. Now, four years on, the credit crunch has put all that into reverse, and the Irish are fleeing the metropolitan scene.
“Easily 90% of the sellers in the last year have been Irish,” says Phil Cann at property company CB Richard Ellis. “Over €1.2bn [£1.07bn] in my market space in London.”
The property bubble, fuelled by cheap credit, saw dozens of London landmarks come under Irish ownership in the boom years. Hamleys toy shop on Regent Street, Versace’s former flagship store on New Bond Street (now closed), jeweller Tiffany & Co on Old Bond Street, the Savoy, Claridge’s, Connaught and Berkeley hotels, Battersea power station and at least half a dozen office blocks and apartment buildings in Docklands all came under Irish ownership at some stage in the past six years.
Prime office space such as the Unilever building on Blackfriars Bridge, Rothschild’s HQ in the City, Goldman Sachs’s Fleet Street office, which once housed the Daily Express, and Citibank’s tower in Canary Wharf were all Irish owned. Retail blocks in some of the choicest parts of central and west London, including Mayfair, Regent Street, Oxford Street and Knightsbridge, were snapped up by Dublin interests.
And everyone was at it: not just professional property developers, but teachers, lawyers, tax inspectors and bakers. Tiffany’s and Versace’s Bond Street stores were bought by Joseph Brennan, famous across Ireland for his Brennans Bread bakery.
When Ireland ran into its financial crisis, the Irish government set up the National Asset Management Agency (Nama) to take control of its struggling banks’ rotten assets. A fifth of the €81bn of toxic property loans now under the control of Nama relate to the UK, making the Irish “bad bank”, along with state-supported Lloyds and the Royal Bank of Scotland, one of the most important property financiers in the country.
Much of the property was bought with debt, and the property developers and investors who once enjoyed a high life of private jets, helicopters and second, third and fourth homes are all under pressure.
The big players are going for debt-for-equity swaps. Some have already gone bust. Others are selling up to achieve sustainable levels of liquidity. Take Real Estate Opportunities – a company controlled by flamboyant developer Johnny Ronan, who was once linked with a former Miss World and was worth €400m at the height of the boom, and his business partner Richard Barrett. It bought Battersea power station, the derelict landmark on the Thames that closed 27 years ago, at the peak of the boom in 2006. Ronan and Barrett have the backing of Wandsworth council and mayor Boris Johnson for a £5bn redevelopment, but are no longer going it alone. They have been on an international roadshow in search of partners and have also agreed with lenders to convert £221m in loans into a 33% stake in the Battersea project.
Nearby at Nine Elms, Ballymore, the biggest Irish property developer in London, is ploughing ahead with a major residential development of a 15-acre site which it is rebranding the “Embassy Quarter” after the United States decided to move its ambassador to the area.
Ballymore, which is owned by bricklayer-turned-tycoon Sean Mulryan, was one of the first developers to go into Nama. The company is now seeking to deleverage and is talking to sovereign funds, pension funds and its creditors about debt-for-equity swaps.
It has also quietly been selling off tracts of land, and recently paid £300m back to Nama. And it is close to concluding a deal that will give RBS and a group of bondholders a 72.5% stake in its redevelopment of the now-demolished London Arena on the Isle of Dogs.
Ballymore has 63 sites around the capital, including half a dozen residential towers in Docklands.
Accounts recently filed showed the company was £1bn-plus in the red. A source says that the debt level is now around the £750m mark, with “around 75%” of that – £562m – in Nama. The source says Ballymore is confident that it can restructure and survive the Irish crisis because of the quality of its sites and that it hopes to “be out of Nama within three to five years”.
Fears have been expressed that Nama, which is charged with clearing Ireland’s debt mountain over seven to 10 years, could end up destroying property values by flooding the market. The impression has gone around the world that you can bag a bargain from the Irish.
But international property consultant King Sturge says it is not concerned about Nama, and that London, as a capital city, is still seen around the globe as a safe haven for commercial property investment. “Middle Eastern, Malaysian, Chinese, Russian and Libyan purchasers, and the Norwegian acquisition of a share in Regent Street over the last year, signal an increasing trend,” says King Sturge in its annual forecast.
The head of investment at the consultancy, Chris Ireland, says “the issue with Nama and the UK banks is whether they flood the market with secondary stuff, and they all have loads of it”. “Secondary” property is taken to mean “assets outside London”.
For some developers, it’s already too late. Nama has pre-prepared “enforcement strategies” drawn up against each member company’s business plan and will use them against any developer that does not co-operate.
In December, it appointed receivers to take control of the City building owned by property developer Paddy Shovlin that is occupied by Rothschild’s.
Another interesting case is that of high-rolling former tax inspector Derek Quinlan, once a landlord on Knightsbridge’s Brompton Road after a £530m deal. Back in 2005 he outbid the Abu Dhabi royal family for a block stretching from Harvey Nichols to Harrods by supposedly offering 25% more than the asking price. To finish off his week’s work, he spent a further £100m on a property on New Bond Street, home to Asprey & Garrard, the upmarket jewellers. The Wall Street Journal went as far as to call him “Europe’s realty czar” .
Now with some €600m in debt, he has had a spectacular fall and, having quit Ireland for Switzerland, is one of the most high-profile sellers on the market. Last year he sold the Knightsbridge block and he is currently trying to flog his most expensive acquisition in the capital – the £1bn Citibank tower in Canary Wharf. He is also a shareholder in the Maybourne group, which owns Claridge’s and the Connaught and Berkeley hotels.
The Barclay brothers, owners of the Daily Telegraph and the Ritz hotel, last week bought a 25% stake in Maybourne’s parent company. But Paddy McKillen, Quinlan’s partner, is adamant that he is not exiting and is hoping to complete a £600m refinancing by the end of the month.
Over on Oxford Street, another Irish firm is ditching stock. The Cosgrave brothers have already sold one retail block that backs onto Hanover Square and another plot up the road. A third plot is currently for sale.
Another prime property sold in the last year is Bow Street magistrates’ court – bought in the boom by a former teacher called Gerry Barrett. He sold it two months ago to Austrian interests for £25m.
Over on the King’s Road in Chelsea, a prime block of shops including a Marks and Spencer has just been sold by a group of 40 Irish investors for £66m, £12.5m more than was paid for the site. And Irish wealth managers Warren & Partners have just sold the Art Deco Daily Express building on Fleet Street 10 years after buying it, with a consortium of more than 20 Irish investors including beef baron Larry Goodman.
Some Irish have had spectacular success in London, some are back to zero, some are badly burnt. But those that can restructure their debt will continue to be in London for a long time.
As British commercial property millionaire Nick Leslau of Prestbury Investments says: “There is no point selling in today’s market as they will get completely hammered on price. It’s my guess that Nama will become adept at doing joint ventures with savvy, financially strong partners to extract value from its portfolio, rather than sit around and wait for value to accrete on its own.”
- Is it right that the State must pay 5.8% on bailout funds whilst NAMA is lending billions to developers at 3%? (thepressnet.com)
- Latest on NAMA’s London portfolio. (politics.ie)
- Ireland’s ‘bad bank’ NAMA becomes one of world’s biggest property lenders (guardian.co.uk)
- NAMA moves to lock stable doors (thepressnet.com)
- Ireland’s battered property entrepreneurs relinquish their London trophies (guardian.co.uk)