Developers’ castles may be built of sand as flood of debt rises
Published 01/04/2010 | 12:23
And what of builders and property developers? There’s no doubt that these Celtic Tiger characters have taken a serious hit to their fortunes.
It may have completely wiped out large chunks of their wealth. We suspect that many are just treading water, but we really don’t know exactly how bad it is.
Firstly, we don’t know how much they have borrowed and how bad their land and assets are worth.
Development land in some parts of Ireland may have fallen by 95 per cent in value. This means that the banks — or rather Nama — owns it.
Crucially, we don’t know the level of personal guarantees given by the developers. If they have put everything on the line for a loan, they are toast. If not, they may still retain some shattered vestige of their former wealth.
How the likes of developer Johnny Ronan can blow €60,000 on a holiday in Morocco we honestly cannot imagine. But he must have made serious money in the good times — and one can only assume that it must have been ringfenced from any guarantees.
However, many builders did give vast personal guarantees, putting up their homes, artworks, horses, share portfolios and far more as collateral.
These property developers and builders made an awful lot of money during the good times. If they were wise, they will have diversified and squirreled away some of the profits or other investments in cash for the bad times. Only the mad or the stupid will have bet the entire ranch on the property market continuing to rise forever.
Ballymore Property’s Sean Mulryan was thought to be worth a tidy €600m back in 2008. When the downturn crashed into his property company, he sold off a stack of his beloved racehorses, dumped the helicopter and laid off large numbers of staff. He then mothballed a number of major building projects in Dublin and Manchester.
Anglo Irish Bank has secured a number of charges over Mulryan’s Ballymore assets, including some of its freehold and leasehold property and its stake in a Davy Hickey property vehicle based in the Isle of Man. Mulryan is one of the top ten borrowers, who are transferring an average of €1.6bn each to Nama.
We don’t know whether Mulryan has personal guarantees or whether the value of his loans is greater than his assets.
We never really had an accurate picture of the former tax inspector’s true wealth, although his personal stash was pegged at about €120m two year ago.
We knew he had gone on a blitzkrieg to buy some of the top pieces of real estate being sold in Ireland, UK, Europe and the US over the last decade.
In fact, Quinlan prided himself on paying top dollar for assets that included the €1bn Savoy Hotel Group, the €1.2bn Jury’s Inn business and the €1bn-plus Citigroup Tower in London. The tower was a personal investment costing close on €500m but largely funded by banks.
Commercial property fell by almost 50 per cent the year after he bought the tower, which must have hit his equity hard. There was also the €40m pad in Cap Ferat, houses on Shrewsbury and Ailesbury Roads, as well as a yacht and a slice of the Pirate Queen Broadway show.
Quinlan has moved to Switzerland, having stepped down from the helm of his Quinlan Private group which renamed itself Avestus.
It emerged that Quinlan’s loans were Nama-bound and that he was one of the top 10 borrowers in the country.
We do not know how much Quinlan is on the hook for personally. A smart man, it is likely that he ringfenced assets and wealth in the good times.
Delgany-based builder Edward O’Dwyer saw profits at homebuilder O’Dwyer Nolan tumble to €2.29m in 2009, with sales falling over 60 per cent. The company had total assets of €129m.
Related company Dwyer Nolan Homes had €35m in shareholders’ funds. Figures for 2009/2010 will be interesting as land values will become easier to read, but we’ve been very bearish.
The 66-year-old O’Dwyer has commenced operations in Hungary, which is probably as badly hit as Ireland.
JOHNNY RONAN & RICHARD BARRETT
Johnny Ronan’s turbulent relationship with model Glenda Gilson catapulted him off the business pages onto tabloid covers.
The high-profile row and “Gooliegate” saw him announce he was taking time away from his Treasury Holdings business.
The firm’s bank loans are Nama-bound, though Treasury says they are all performing fine. Then again, we don’t know the current value of the assets and liabilities.
In 2007, Ronan and his partner Richard Barrett were estimated to be worth over €395m.
Treasury indicates that it has 131 real estate projects with a combined value of €4.6bn. These are Treasury’s estimates and have not taken account of a collapse in property prices. Treasury also owns 67 per cent of REO, which is capitalised at nearly €74m but has over €1.2bn in debt.
In 2007, the docklands impresario was thought to be worth around €315m.
Crosbie owns large swathes of the riverside and is redeveloping the Point and Point Village. AIB bankrolled big chunks of the development.
Last year Crosbie was sued by partners Treasury Holdings over a €3m payment but he countersued, claiming he was owed €70m. It was settled out of court, with Crosbie describing it as a “lover’s tiff”.
He has just opened the Grand Canal Theatre, bringing the Russian State Ballet to the Dublin docklands.
Grehan was one of the biggest spending developers, splashing out €171m for the UCD vets school in Ballsbridge on a twoacre site. It has been used as a car park.
Grehan gave a personal guarantee to cover the interest on €110m worth of borrowings from AIB for the land. At one stage, his Glennkerrin Homes was valued, somewhat optimistically, at €600m.
The Lucan-based Menolly Homes owner is fighting the Revenue over a €20m VAT bill. Ross was the biggest homebuilder in Dublin, having built over 20,000 houses.
Menolly was thought to have had sales of €250m in 2006. This year about 10,000 homes — mostly one off buildings — will be constructed in the country. Close to 90,000 homes were built in 2006.
The Auditor’s report for Menolly Homes indicated that it made a loss in 2007.
The developer of the Dundrum shopping centre is set to be another of Nama’s top 10 clients. Dundrum shopping centre is seeking to hike rents by as much as 60 per cent in an upcoming rent review.
O’Reilly, who was valued at about €180m in 2008, lost close to €8m on Anglo Irish shares. The value of his property assets, including Dundrum, will have fallen sharply. But we don’t know how much he has borrowed.
Donegal’s Pat Doherty was valued at €375m just two years ago. The art nut and property magnate is developing the Titanic quarter in Belfast.
Most recent figures for his Harcourt Developments company show that it had net debts of €689m at the end of 2008, with shareholders funds of €133m.
It is just one company within the corporate structure, which holds other cash and assets.
Carlow builder Sean Dunne spent around €375m in 2005 assembling a chunk of land in Ballsbridge. The Sunday Independent carried a piece that weekend, branding the deal “madness”.
In February his bankers effectively took control of the properties. Accounts for his DCD Builders show that Dunne had given personal guarantees for over €100m in bank loans. The company estimated the ''recoverable value'' of its sites at €601.6m.
It had bank borrowings of €763m at the end of 2008. Dunne’s net worth was estimated to be around €103m in 2007.
One of the Anglo 10, who coughed up for some of Sean Quinn’s stake in the bank, McKillen is also set to be one of Nama’s top names, though he’s said to be resisting the transfer of some asset-backed loans.
McKillen, who owns the Jervis Centre as well as a stack of commercial and retail property in Dublin and the UK, also has interests in the Far East. We do not know his level of borrowings or if they exceed his assets. He was worth €137m in 2007.
Gerry Gannon recently landed a €20m 20- year contract to provide storage for the National Museum. One of the Anglo 10, he is also one of the Nama 10.
Latest figures for his Gannon Homes are three years out of date but showed the building firm had lost €13.65m in 2007, as sales halved.
The company had loans of more than €180m, some secured on land that was valued at €152m — in 2006. Two years ago, his wealth was pegged at €170m.
Galway developer Gerry Barrett owns a rake of hotels, including the G Hotel in Galway, Ashford Castle in Mayo and Jury's Inn in Limerick. He developed the €150m Scotch Hall retail centre in Drogheda, which opened as the economy tanked.
Two of his main firms, Edward Holdings and Radical, had net liabilities of €35m at the end of 2008, with auditors noting that it “may cast significant doubt” on the companies’ ability to continue as a going concern At the time, company directors were confident it had sufficient resources to operate for the foreseeable future